Western Islamic finance sector finds major growth in the UK, despite moderate domestic participation

Western UK maintains its position as the primary Western center for Islamic financing, as Islamic banking persists.

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2025 September 13 . 8:21 PM

2 min read

Western Islamic finance sees the UK at the forefront, with robust growth despite smaller domestic... — Western Islamic finance sees the UK at the forefront, with robust growth despite smaller domestic participation

Western Islamic finance sector finds major growth in the UK, despite moderate domestic participation

The United Kingdom has established itself as a leading Western hub for Islamic finance, with the London Stock Exchange (LSE) holding the title of the world's largest listing venue for hard-currency sukuk. As of H1 2025, the LSE accounts for over 40% of global share in this sector.

Nearly all sukuk listings in London originate from GCC countries, with Middle Eastern sukuk and bond issuers raising a combined total of $65 billion on the LSE in the first seven months of 2025, second only to UK-based issuers. This trend reflects the significant presence of GCC investors in UK Islamic banks, who continue to be major shareholders.

Fitch Ratings rates around 80% of the hard-currency sukuk listed in London, with 85% investment grade and most issuers enjoying a Stable Outlook. The credit rating agency currently rates two UK Islamic banks, both at 'A' with Stable Outlooks.

The UK Islamic finance industry is supported by a robust infrastructure of financial, professional, and legal services. English law is widely used to govern international sukuk contracts, providing a secure and trusted environment for transactions.

The sector caters primarily to GCC clients, offering a variety of products such as real estate finance, wealth management, and digital banking services. The UK's Islamic banking assets grew by 38% year-on-year to $11.4 billion at end-2024.

Alongside traditional banks, the UK has a significant presence of Islamic FinTech companies. The number of Islamic FinTechs in the UK exceeds 50, including a fully digital Islamic bank. In late 2024, FinTech firm Offa acquired Bank of Ireland's Islamic home finance portfolio, signalling the growing importance of technology in the sector.

Islamic funds in the United Kingdom have assets under management reaching $12.5 billion by mid-2025, with a year-on-year growth of 22.1%. Equities dominate the asset class (84%), followed by commodities (10%).

Competition for sukuk listing leadership is intensifying, with exchanges like Euronext Dublin, Frankfurt Stock Exchange, and Nasdaq Dubai vying for dominance. However, in recent months, Dubai and Singapore have emerged as direct competitors to London. This competition underscores the UK's commitment to maintaining its position as a global leader in Islamic finance.

The UK Islamic finance industry continues to attract foreign direct investment, reinforcing government efforts in this regard. The industry's growth and success underscore its potential to contribute significantly to the UK economy, making it an exciting sector to watch in the years to come.