UK Aims to Capture Larger Share of Rapidly Expanding Islamic Finance Market

LONDON — The United Kingdom is moving to solidify its status as the premier Western hub for Islamic finance, driven by surging Muslim wealth and demand for Shariah-compliant investments. However, a new industry report cautions that London risks ceding ground to rival financial centres unless it accelerates its efforts.

According to the London Stock Exchange Group, global Islamic finance assets are on track to approach $10 trillion by the end of the decade.

The sector has expanded at an estimated 10% to 12% annually in recent years, significantly outpacing the broader financial industry.

The potential capital pool is even larger.

Muslims worldwide held an estimated $27.8 trillion in wealth at the end of 2025, according to the Cambridge Islamic Wealth Management Report cited by TheCityUK.

Approximately $24 trillion of that wealth has yet to be channelled through Shariah-compliant vehicles.

TheCityUK, which represents Britain’s financial and professional services sector, says the figures represent a major opportunity for the UK to attract investment into property, infrastructure, renewable energy, healthcare and technology.

“Islamic finance is a strategic growth opportunity for the UK,” the organisation stated in its July 2026 report, describing the sector as a bridge between Britain’s capital markets and rapidly expanding pools of institutional capital across the Gulf, Asia and Africa.

The UK already maintains a substantial foothold in the market.

Fifty-seven Islamic investment funds were launched in Britain in 2024, while Islamic assets under management in the UK surpassed $12.5 billion by June 2025, marking a 22.1% increase over the previous year.

Globally, Islamic funds expanded by 37% during 2025.

London has also drawn significant Shariah-compliant investment into some of Britain’s most high-profile property developments.

Qatari and other Gulf investors have deployed Islamic financing structures in projects such as Chelsea Barracks, The Shard and East Village, while Malaysian and UAE investors have participated in major UK real-estate transactions.

The UK’s Islamic finance market has also advanced into more sophisticated forms of capital raising.

In 2014, the British government issued a £200 million sovereign Sukuk, followed by a £500 million issuance in 2021.

Sukuk are Shariah-compliant investment certificates that provide investors with returns linked to ownership of, or investment in, underlying assets rather than conventional interest.

Both issuances attracted strong international demand. In 2018, Al Rayan Bank issued a £250 million Sukuk that was oversubscribed to 155% of the order book.

The global Sukuk market itself reached a record $291 billion in new issuance in 2025, a 14.5% increase from the previous year, pushing outstanding Sukuk above $1 trillion.

Growing Competition in Islamic Finance

However, Britain faces intensifying competition.

Countries such as the UAE, Saudi Arabia, Malaysia and Türkiye are increasingly embedding Islamic finance into their national economic strategies.

The UAE, for example, has set a target of $700 billion in Islamic banking assets by 2031, alongside more than $180 billion in Sukuk issuance.

Türkiye has also demonstrated how sustained sovereign Sukuk issuance can stimulate private-sector borrowing.

Turkish Petroleum’s 2026 Sukuk was 5.5 times oversubscribed, attracting 165 investors across Europe, Asia and the Middle East. A subsequent $500 million tap brought the total issuance to $1.5 billion.

Domestically, the opportunity is equally significant. England and Wales were home to approximately 3.9 million Muslims, representing 6.5% of the population, according to the 2021 Census.

Yet TheCityUK notes that British Muslims continue to face limited access to suitable Shariah-compliant savings, pension and investment products.

The report argues that expanding these products could simultaneously improve financial inclusion for Britain’s Muslim population and channel more capital into the wider economy.

It recommends that the government develop a dedicated Islamic finance investment portal, maintain regular sovereign Sukuk issuance, expand Shariah-compliant insurance offerings, and position London at the intersection of Islamic finance and digital assets.

The stakes are increasingly international.

For Britain, Islamic finance is no longer merely a niche service for Muslim consumers; it is becoming a contest for some of the world’s fastest-growing capital pools — and London is determined to ensure that a significant share of that capital continues to flow through the UK.

Source link