Hugo Swire's speech at Islamic Finance and Investment Conference
Mr Swire spoke at the 14th annual Euromoney London Islamic Finance and Investment Conference about UK support for this fast-growing sector
Thank you, Mohamed, for that introduction. I am delighted to join you all for this annual conference, now in its 14th year.
Coincidentally, about the same time that I have had the great pleasure of serving as a Member of Parliament.
But today I would like to say a few words in my capacity as Minister of State at the Foreign and Commonwealth Office, with responsibility for Islamic Finance…
…about a fast-growing sector that the British Government considers of vital importance to the success and prosperity of the United Kingdom.
Indeed, as Prime Minister David Cameron once put it, we want London to “stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic Finance anywhere in the world.”And we are committed to making this vision a reality.
We already have excellent foundations to build on:
The United Kingdom is an outward facing country;
We’re open for business;
Home to the world’s number one financial centre;
We have a legal system that lets investment, innovation and business thrive;
Last year’s World Investment Report confirmed the UK as the number-one country in Europe for inward foreign direct investment;
And we have the fortune that English is the global language of business and a central position between Asian and American time zones, which means we are ideally placed as a hub for the rest of the world.
But this Government has also worked hard to make it so.
The UK now has the lowest headline corporate tax rate in the G7 and the fourth lowest in the G20. We have reduced red tape; increased access to credit; enhanced protection for investors; simplified the tax system; and made it easier and faster to register property.
And so it is no coincidence that Islamic Finance is doing so well here. In the UK there are now 6 fully Islamic banks - with over 20 others offering Islamic Finance products and services.
The majority of Islamic contracts are in English law - over 25 British law firms have Islamic Finance units. And over £23 billion has been raised on the London Stock Exchange through 53 issuances of Sukuk.
And our world-renowned academic institutions offer specialised training courses and qualifications.
We, in Government, have given this vibrant, rising sector our full support:
For example, we hosted the World Islamic Economic Forum in London in October 2013 - the first time it was held outside the Islamic world, attracting over 2,700 delegates from 128 countries.
At the Forum, we promised to issue a sovereign Sukuk. And in June last year, we delivered on that promise - becoming the first Western country to do so.
In total, we issued £200 million of sovereign Sukuk, with orders for the issuance totalling £2.3 billion - meaning it was oversubscribed by nearly 12 times. This clearly illustrates the significant - and growing - interest in Islamic Finance here in the UK.
On other areas of Government work, the UK’s export credit agency - UK Export Finance - expects later this year to bring its first guaranteed Sukuk to market for one of Airbus’ suppliers - the first such Sukuk for an aviation transaction to be backed by an export credit agency.
And I hope that these achievements inspire further issuances of Sukuk by businesses, as the Islamic Finance industry in the UK continues to expand.
At the World Islamic Economic Forum, we also announced three other initiatives:
First, the creation of an Islamic index at the London Stock Exchange;
Second, the introduction of two new financial products - Islamic student and start-up loans;
And third, a new Global Islamic Finance and Investment Group.
This group’s aim is to identify opportunities for and barriers facing Islamic Finance - and to use its expertise to create a global Islamic Finance market supporting growth and prosperity, both in the UK and around the world.
Among the group’s membership are Premiers, Ministers, CEOs of major Islamic banks, central bank Governors and regulators - people who can make a real difference to the global landscape of Islamic Finance.
I am pleased that our first meeting last year resulted in agreement on a number of concrete steps, and I want to highlight just three:
We agreed to start work on a comprehensive analysis to be conducted on the current global market, and then a broad strategy developed to foster understanding and challenge perceptions of Islamic Finance;
We agreed to consider how to exchange expertise on regulation;
And we agreed to look at an engagement strategy, to encourage potential investors.
Each of these initiatives will play a key role in fostering the best possible environment for Islamic Finance to thrive around the world.
I am delighted to be hosting the second Global Islamic Finance and Investment Group in Kuala Lumpur on 26 February, co-hosted by Governor Zeti from Malaysia’s Central Bank - and I know there are a few members in the room. If you have not already accepted the invitation, please do. One of the subjects I am keen to discuss there is infrastructure, which I know you’ll be discussing later today.
The last few years have seen many flagship developments in the UK funded - or part-funded - by Islamic Finance, such as The Shard, Chelsea Barracks, Harrods and the Olympic Village.
And over the coming years, we will be seeking significant further inward investment in our infrastructure.
For example, the UK needs to build hundreds of thousands more homes every year to meet demand - creating enormous opportunities for Islamic banks.
Over six and a half thousand of those homes - in the North-West and the Midlands - are currently being financed by a £700 million investment by Gatehouse Bank - a fully Shari’ah compliant bank.
And I hope we will see billions of pounds worth of new investments from the Islamic world continuing across a range of sectors in the UK.
So, I am proud of the achievements of the UK and of Islamic Finance. But at the same time, I recognise that despite all this progress, challenges remain.
For example, how do we develop the market and access the huge opportunities available? The Government is helping to create the right environment, but to access liquidity we need more than Government Sukuks - we need more corporate Sukuks.
So, how can the industry engage more partners?
What new ideas can the Islamic Finance community come up with, to better exploit opportunities?
And are there opportunities for financial institutions in Islamic countries to invest in longer term infrastructure bonds?
These are all longer-term questions - and I know many of you, here today in this room, will play a vital role in finding the answers.
So in conclusion, this Government understands the importance of Islamic Finance for the UK’s prosperity. And we are determined to get the framework right - so that the industry can flourish into the future. That is why we see it as vital that we work with you - the experts.
By combining our strengths, I have no doubt that, together, we will achieve the Prime Minister’s vision. And London will indeed stand proudly alongside Dubai and Kuala Lumpur as one of the great global capitals of Islamic Finance.
Thank you, and I hope you have a productive conference.
Further information
Follow Foreign Office Minister Hugo Swire on twitter @HugoSwire
Follow the Foreign Office on twitter @foreignoffice