Key facts
- The UK's Islamic finance sector is valued at an estimated £6bn.
- The sector could generate £2.5bn annually for the UK government.
- Islamic finance facilitates significant Gulf investment in Britain, including in real estate and housebuilding.
- 85% of the European Islamic finance market is comprised of British Islamic finance assets.
- The report recommends the establishment of a dedicated Islamic Finance Unit and a sovereign Sukuk programme.
A report by the British think tank Equi has revealed that the UK's Islamic finance sector is worth an estimated £6bn and could generate £2.5bn annually for the UK government. The report highlights that Islamic finance is a key facilitator of significant investment from the Gulf region into Britain, contributing to major projects like The Shard and Battersea Power Station, as well as UK housebuilding.
The report recommends that the UK government establish a dedicated Islamic Finance Unit to support the sector's growth and ensure it contributes to economic expansion and financial inclusion. It also advocates for a sovereign Sukuk programme focused on sustainable projects to bolster the UK's global standing in Islamic finance and support net-zero commitments.
According to the findings, 64% of British Muslims prefer Islamic finance, and a notable 30% of non-Muslims would consider switching to comparable Islamic finance products. British Muslims also demonstrate a higher awareness and propensity to use green finance products. The sector has seen strong domestic growth, with Islamic retail banking customers increasing by 20% annually between 2020 and 2025.
However, the report cautions that the current orientation of Islamic banks towards high-net-worth clients in the Gulf may be limiting the sector's full potential for UK economic growth. It also points to significant financial exclusion faced by British Muslims, citing instances of debanking, where bank accounts are suspended without explanation, affecting 42% of Muslim charitable organisations. The report identifies the absence of faith considerations in the UK's Financial Inclusion Strategy as a notable oversight.