UK Is The Wests Leading Islamic Finance Hub, Says Fitch As Funds AUM Pass $12.5bn

The London Metal Exchange is also widely used by Islamic banks to facilitate cash financing.

The UK’s deep financial, professional and legal ecosystem—plus human capital—underpins the global industry.

Islamic finance in the UK

UK banks act as key arrangers and counterparties across sukuk, Islamic interbank and derivatives markets, while Gulf Cooperation Council (GCC) investors remain major shareholders in all UK Islamic banks.

Despite this role, Islamic banking’s domestic market share in the UK remains low.

The LSE provides access to a deep, diverse investor base and is the largest global listing venue for hard-currency sukuk with more than a 40 per cent share as of end-1H25.

It is also the second-largest venue for hard-currency ESG sukuk after Frankfurt Stock Exchange.

Nearly all sukuk listed on the LSE originate from GCC issuers. Middle Eastern sukuk and bond issuers raised $65bn on the LSE in the first seven months of 2025, ranking second only to UK issuers.

Competition, however, is intensifying from Euronext Dublin, Frankfurt Stock Exchange and Nasdaq Dubai.

Fitch rates about 80 percent of hard-currency sukuk listed on the LSE (end-1H25), with around 85 per cent investment-grade and most issuers on a Stable Outlook.

Islamic funds in the UAE

UK-based Islamic funds are the largest contributors to the domestic industry, with AUM more than $12.5bn at end-June 2025, up 22.1 per cent year on year (IFN Investor).

Allocations are primarily to equities (84 per cent), followed by commodities (10 per cent).

UK Islamic banking assets rose 38 per cent YoY to $11.4 billion at end-2024. The UK added an Islamic bank in 2024 via the conversion of Ahli United Bank (UK) PLC to Kuwait Finance House PLC.

Fitch rates two UK Islamic banks at ‘A’ with Stable Outlooks. All UK Islamic banks have GCC shareholders and primarily serve GCC clients, offering real estate finance, private banking, wealth management and digital products.

The UK now counts more than 50 Islamic fintechs, including a digital Islamic bank. Europe Arab Bank launched Islamic banking services in May 2025, while Offa acquired Bank of Ireland’s Islamic home finance portfolio in late 2024.

Still, Islamic banks represent just 0.1 per cent of UK banking assets (3Q24). Barriers include limited product ranges, higher fees versus conventional products, gaps in understanding and the perception Islamic finance is only for Muslims (Gatehouse Bank survey), alongside the UK’s minority Muslim population share.

Policy and issuance outlook

The UK Treasury began consulting on Phase 1 of the Consumer Credit Act reform in May 2025. In Phase 2, the government intends to assess barriers to sharia-compliant finance and consider steps to address unmet needs—signalling momentum to broaden access and inclusion.

The government also aims to introduce Alternative Student Finance—a sharia-compliant student loan—“as soon as possible” following the rollout of the Lifelong Learning Entitlement from the 2026–2027 academic year.

The UK was the first Western sovereign to issue sukuk (2014) and returned in 2021, but does not plan a sukuk in 2025–2026. Outstanding sukuk from UK-based entities stood at ~$740m in July 2025, mostly sovereign paper maturing in 2026.