Until the summer of 2007, London seemed to be roaring ahead in the Islamic finance stakes and looked set to become the global hub. But then a few things happened that slowed it down somewhat. First Gordon Brown moved from being the Islamic finance-friendly chancellor of the exchequer to become embattled British prime minister.
Alasdair Darling, who succeeded him, came hot-foot from his role as the secretary of state for trade and industry. He barely had time to settle in to his new position than he found himself in possibly the toughest test for any minister as there was a run on the Northern Rock bank which had found itself heavily exposed to the subprime crisis. Darling’s handing of the crisis in the summer of discontent was heavily criticised.
However, he was not alone. Both the FSA and Bank of England also came under attack for their response. Darling’s apparent mishandling of several events since then has also not endeared him to anyone. To be fair to Darling, not many people would have wanted to be in his place and how many could have done any better?
His March 12 budget was being closely watched by the Islamic finance world to see if he could match his predecessor’s enthusiasm for the subject, but in the end he seemed to deliver little. Everyone was expecting some sort of announcement on the issuance of a sovereign Sukuk, but it did not quite go that far and instead said that, “the government remains committed to examining this issue and in the Finance Bill 2008 will take legal powers to facilitate any potential future issuance.”
The budget also said that the government would “promote the expansion of the [UK] market in Islamic finance and....promote the City of London as a centre for global Islamic finance.” Many people had been expecting a lot more and this was, in all likelihood because they had become used to Gordon Brown pushing through one change after another.
What they had not bet on was that Darling’s crisis inbox would be overflowing with problems before he had a chance to get his head around the concept of Islamic finance. The appearance to many in the Islamic finance community was of a county that seemed to have lost interest in Islamic finance and people in the Middle East and South East Asia quickly went back to trying to promote their areas as the global hub for Islamic finance.
Many had been watching the moves within the UK with great interest to see what they could learn and also to see what kinds of investment opportunities it provided for those who wished to invest their Islamic dollars outside of their home regions.
Things tend to start off slowly when the baton of ministerial responsibility is passed from one minister to another and not many people in Darling’s position, possibly with the exception of Alan Greenspan, has had to deal with a financial crisis of such severity. However, Greenspan’s handling of the 1987 stock market crash was seen as exemplary, whereas history has thus far been less forgiving of Darling. Neither man had the typical honeymoon period to allow them to settle in to their new job. Could Gordon brown have done any better if it happened during his tenure at Number 11?
Yet it is all not all doom and gloom. The Right Honourable Kitty Ussher, who replaced Ed Balls as the economic secretary to the treasury seems to be quite keen on the whole idea of Islamic finance. She has demonstrated a keen interest in the business and did not hang about. She has chaired several high level meetings and conferences on the subject, some of them even as Darling grappled with the Northern Rock crisis. She also seems to have gotten behind the push for a sovereign Sukuk, but has cautioned that it should not be rushed.
"This is the first time that a G7 country has considered issuing Sukuk and so we want to make sure that we get it right,” she said. The talk in the street in the City of London is that 2008 could well be the year of the UK sovereign Sukuk. Maybe.
An announcement of some sort is expected to come from the London Sukuk Summit which takes place on 25 and 26 June with one of the themes reported to be called ‘Gearing up for UK Sukuk originations’. However, a bit of a lull in activity could take place as parliament goes off on summer holidays and holy month of Ramadan is expected to start at the end of August or early September, which means that any activity is unlikely to take place until October at the earliest.
Tomorrow, Monday, sees a seminar taking place called ‘Women in Islamic finance’ in London, and apart from the usual debates and discussions on women in Islamic finance, there is no doubt that a lot of attention will be focused on the woman behind the UK’s first sovereign Sukuk.
Watch this space.