FOn March 11, the Government launched the UK’s first Islamic Finance Task Force. The work of the task force will be to cement the UK’s status as the Western hub for Islamic finance and further enhance London’s position as the world’s leading financial centre, just as we are reaping the benefits of our work to develop London’s market for the Chinese currency renminbi.
London offers world-class financial and associated services, including accountancy, law and arbitration, fully geared to the requirements of Islamic finance, enabling every stage of a deal to be completed in one financial centre.
The UK is also home to leading innovators, thinkers and education practitioners, and the task force will promote the services provided by UK universities and other education, training and qualification providers abroad.
Since the financial crisis in 2008, the global market for Islamic financial services has experienced significant growth. Ernst & Young estimate that the global market for Islamic banking assets grew to $1.3 trillion in 2011, an annual growth of 19 per cent between 2007 and 2011 and that assets will reach $1.8 trillion in 2013. The industry forecasts that by 2015 it will be worth nearly $2.5 trillion.
There are major opportunities to attract investment into the UK as demand for Islamic finance increases
As global demand increases from sovereign wealth funds, large private wealth investors and institutions, the further development of compatible regulatory frameworks will follow, and we expect London to be at the heart of the industry’s growth.
Over the past ten years the UK has sought to create a practical and convenient environment for Islamic finance, introducing a series of reforms with the aim to provide a level playing field on tax and regulations. These policies broaden the market for Islamic products both for Islamic institutions and conventional firms offering Islamic finance services, most recently under this Government’s Finance Bill 2012. The task force will keep the regulatory framework under review to make sure we have done all we can.
The City and the numerous regional hubs are some of the UK’s core assets, and Islamic finance is playing an increasing part of that. This Government’s priority is to make sure that Britain is not only open for business, but that we retain our competitiveness. The Budget last month lowered the main rate of corporation tax to 20 per cent from 2015, making the UK tax system the most competitive in the G20, and introduced a targeted package of measures to improve the competitiveness of the UK as a location for investment funds.
The creation of a new Financial Services Trade and Investment Board in the Budget is a further example of the Government’s ambition to promote our industry. This board will have the authority and expertise to identify trade and investment priorities, and to support UK firms in pursuing these vigorously across the globe.
There are also major opportunities to attract investment into the UK as demand for Islamic finance increases and we will look at ways the Islamic Finance Task Force can mobilise funding, for example in to the top 40 priority infrastructure projects identified in the National Infrastructure Plan – a key part of the Government’s economic strategy.
The Islamic Finance Task Force will also seek to increase awareness and showcase our industry by engaging with leading players and institutions on the international Islamic finance stage. These will include working with the governor of the Central Bank of Malaysia, INCEIF, the Islamic Financial Standards Board, UKIFS and a multitude of other leading organisations.
Importantly, the task force will also champion the World Islamic Economic Forum (WIEF) in London from October 29 to 31. We are delighted that for the first time the WIEF is being held outside the Muslim world and that London has been selected as the host city.
Greg Clark is Financial Secretary to the Treasury and former director of policy for the Conservative Party.
Baroness Warsi, a Conservative member of the House of Lords, is Senior Minister of State at the Foreign and Commonwealth Office, and former chairman of the Conservative Party.
