Despite obstacles, the UK maintains its position as the Islamic finance center in the West

The United Kingdom has established itself as a significant player in the global Islamic finance sector, with its banks playing key roles in various markets. UK banks are active arrangers and counterparties in sukuk, Islamic interbank, and derivatives markets.

This growth is reflected in the rising assets of UK Islamic banking, which saw a 38% year-on-year increase to £11.4 billion by the end of 2024. Notably, the UK Islamic banking industry was taken over by the Kuwait Finance House (KFH) in 2024, with the bank rebranded as Al Rayan Bank.

One of the key factors contributing to the UK's success in Islamic finance is the London Metal Exchange (LME), which has been accessed by numerous Islamic banks for cash financing. The LSE, on the other hand, is the largest listing venue globally for hard-currency sukuk, holding over a 40% share. The LSE also serves as a key listing venue for global US dollar sukuk and is the second-largest listing venue for hard-currency ESG sukuk globally after the Frankfurt Stock Exchange.

Sukuk from UK-based entities amounted to approximately £740 million outstanding in July 2025, with the majority of sovereign issuances maturing in 2026. Despite this, the UK government does not plan to issue sukuk in 2025-2026, having issued sovereign sukuk for the first time in 2014 and following up with another issue in 2021.

Gulf Cooperation Council (GCC) investors are major shareholders in all UK Islamic banks, indicating a strong connection between the UK and the Middle East in the Islamic finance sector. This connection is further strengthened by the launch of Islamic banking services by Europe Arab Bank in May 2025.

The UK government is also taking steps to further develop the Islamic finance sector. In May 2025, the UK Treasury began consulting on Phase 1 of the Consumer Credit Act Reform, with plans to introduce a sharia-compliant student loan scheme, Alternative Student Finance, as soon as possible following the introduction of a more flexible student finance system, the Lifelong Learning Entitlement, from the 2026-2027 academic year.

The UK government also aims to assess barriers hindering firms' provision of sharia-compliant finance and consider measures to address unmet needs in Phase 2. With over 50 Islamic FinTech firms in the UK, including a digital Islamic bank, and English law being commonly used to govern international sukuk, the UK is well-positioned to continue its growth in the Islamic finance sector.

In late 2024, FinTech company Offa acquired Bank of Ireland's Islamic home finance portfolio, further demonstrating the UK's commitment to the sector. The UK's status as the leading Western hub for Islamic finance is evident, and it continues to attract investment and innovation in this growing field.

Despite obstacles, the UK maintains its position as the Islamic finance center in the West