A new report from TheCityUK warns the UK must act quickly to keep its status as a leading western hub for Islamic finance. The document, titled “Islamic finance and UK economic prosperity: A vision for growth,” highlights the sector’s rapid expansion, with assets expected to hit $7.5 trillion by 2028. Muslim wealth globally is estimated at $27.8 trillion, creating opportunities for the UK to attract Shariah-compliant investment.
Opportunities and Challenges
The report notes the UK has already drawn Islamic capital into major projects like The Shard and Battersea Power Station. However, competition from other markets is rising, and the UK risks losing its edge if it doesn’t improve coordination between government and industry. Key areas for growth include real estate, infrastructure, and innovation in Islamic capital markets.
One recommendation is the use of sovereign Sukuk—a type of Islamic bond—as a strategic tool to signal the UK’s commitment to the sector. Sovereign Sukuk also suggests creating a dedicated investment portal to help Islamic investors find opportunities in the UK. Strengthening expertise within HM Treasury and financial regulators is another priority.
TheCityUK emphasizes the need for a “whole-of-government approach” to ensure the UK remains competitive. Nicola Watkinson, the organization’s managing director, said global investors are watching closely, and the UK’s offer must be clear and compelling. She called for faster action and greater ambition from regulators and policymakers.
Broader Economic Impact
The report outlines potential benefits beyond finance, including expanded exports of UK professional services to markets like Malaysia and Indonesia. It also highlights opportunities to improve financial inclusion for Muslim communities in the UK, who often face gaps in savings and pension products.
Islamic finance’s growth aligns with global trends toward diversification and ethical investing. For the UK, maintaining its position requires more than existing successes—it demands proactive steps to shape the future of the sector. As Muslim-majority economies build Shariah-compliant systems, the UK must adapt to stay relevant.
Efforts to integrate Islamic finance into the UK’s economic framework could also strengthen trade relationships with countries where Islamic banking is prevalent. This could open new markets for UK financial services and create employment opportunities in sectors aligned with Islamic principles.
The report’s analysis shows the need for policy clarity and regulatory frameworks that support Islamic financial instruments. By addressing these gaps, the UK can position itself as a leader in this growing sector while attracting investment from both domestic and international sources.
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