London looks to build on Islamic investment lead

 
Liam Ward-Proud
A GUIDING principle of the World Islamic Economic Forum is that business and trade connections can bring the Muslim and non-Muslim worlds closer – politically, culturally, and economically. Today, speakers including Lord Green, the UK’s trade and investment minister, Kamal bin Ahmed, acting chief executive of Bahrain’s Economic Development Board, and Jaguar Land Rover chief executive Ralf Speth, will assess how policymakers can create a framework for global growth, and businesses can tackle the challenges inherent to a changing world.

For the UK, and particularly London, the question will be how to build on existing successes. Islamic investors have already put billions into iconic sites like Battersea Power Station, bought by a Malaysian consortium for £400m in 2012, and the Olympic village. And investment has flown both ways. More than a decade ago, Dyson moved most of its factories to Malaysia, with profits rising from £18m to £40m in the year following the move. UK Trade and Investment has flagged Indonesia, Turkey, Saudi Arabia, Qatar and the United Arab Emirates as high growth markets for UK firms to target.

The size of the Islamic financial market, however, is growing quickly. The value of global Islamic financial assets rose from $462bn (£286bn) in 2006 to almost $1.5 trillion last year, a rate of expansion that would see the figure hit $2 trillion by the end of 2014. And experts agree that more of these funds will be looking for a home in the West.

As Abdulaziz Al Duweesh of the Islamic Gatehouse Bank says, “Islamic investors have increasingly been looking to diversify beyond their local economies. Developed markets such as the UK and Western Europe are seen as safe destinations in this regard.”

London is well-placed to take further advantage of this trend. “Britain has done a huge amount through the tax and regulatory systems to encourage this,” says Farmida Bi, European head of Islamic finance at Norton Rose Fulbright. The 2006 Finance Act, and subsequent legislation, has ensured that many Islamic financial products are taxed on the same terms as non-Islamic equivalents. David Cameron will today announce plans to launch the first sovereign sukuk debt instrument outside the Muslim world.

“We may moan about our regulatory regime,” says Lord Green. “But it is well-regarded internationally, and has been a key asset in making the UK a hub for Islamic finance.” The institutional resources on offer to Islamic financiers also set the UK apart. Five domestically-regulated Islamic investment banks and one retail bank are based in the UK, and professional services firms offer extensive Islamic finance resources.

London leads the world. The challenge will be both to build on this success, and to develop the UK as a springboard for further Islamic investment into Europe.

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