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UK Preparing to Launch Second Sterling-denominated Sukuk to Further Consolidate Britain as the Western Hub for Islamic Finance in a Post-Brexit Dispensation

UK Preparing to Launch Second Sterling-denominated Sukuk to Further Consolidate Britain as the Western Hub for Islamic Finance in a Post-Brexit Dispensation

Brexit or No Brexit, the UK’s Islamic finance proposition is set to continue and consolidate as the country seeks to forge new trading, investment and financial partnerships. The strength of the UK’s policy is underlined by a supportive cross-party approach which ensures continuity in the event of a change of prime minister or government party in office.

Erstwhile Prime Minister Theresa May alluded to the UK’s Islamic finance proposition in her address to the Lord Mayor’s Banquet at Mansion House, London last November. “As a global trading hub, the United Kingdom has always understood that our prosperity depends on the global rules we uphold and the partnerships we build. From the world’s first insurance market to the creation of the biggest Islamic finance centre outside the Islamic world, we have not only driven the trade and investment that fuelled unprecedented growth but helped to shape the institutions and governance that sustains it. Not least, right here in this great City of London,” she emphasised.

At his Mansion House speech in June 2019, outgoing Chancellor of the Exchequer, Phillip Hammond confirmed that “tonight, I can announce the issuance of a second sovereign Sukuk by the UK.” The UK became the first Western country to issue a sovereign Sukuk in 2014, raising GBP200 million from a five-year transaction that was 10 times oversubscribed.

The appointment of Sajid Javid as the new Chancellor of the Exchequer by Prime Minister Boris Johnson augurs well for this continuity. Mr Javid in a previous capacity as Chief Secretary to the Treasury helped formulate the UK’s Islamic finance policy.

In July, John Glen, the Economic Secretary to the Treasury, reiterated at the London Sukuk Summit: “The original 2014 UK Sovereign Sukuk will mature later this month, having unlocked millions in sterling denominated liquid assets for Islamic banks. And it was so successful that we’re following it up with a second Sovereign Sukuk, as the Chancellor (Hammond) announced last month in his Mansion House speech. Further information on the specifics will be announced in due course. But I can tell you that the Sukuk will be sterling-denominated, which should help UK-based Islamic financial institutions in meeting their mandatory liquidity requirements without additional FX risk, and help the market by providing an additional source of high-quality liquid assets.”

Mr Glen in his capacity also as City Minister is a key member of the Treasury team of ministers under Chancellor Sajid Javid. His optimism regarding the future of the UK’s Islamic finance proposition cannot be doubted.

The City of London, he added, “has always been a beacon: drawing business, capital, and talent from around the world. It has shone even more brightly over the last few decades as we embraced the energy of Islamic finance. And that beacon will continue long into the future – not dimmed by Brexit but fueled by Brexit – as we move towards a truly Global Britain. Now, as we bring together the innovators and experts of this wonderful field, we can plot the path ahead. Securing Britain’s place as the Western hub of Islamic finance. And a future of continuing partnership and shared prosperity.”

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