“The empire of the Caliphs seems to have been the first state under which the world enjoyed that degree of tranquility which the cultivation of the sciences requires. It was under the protection of those generous and magnificent princes, that the ancient philosophy and astronomy of the Greeks were restored and established in the East; that tranquility, which their mild, just and religious government diffused over their vast empire, revived the curiosity of mankind, to inquire into the connecting principles of nature.”

- Adam Smith, History of Astronomy

Due to specific proscriptions within Sharia, such as the prohibition on interest, many Muslims are unable to make full use of traditional financial institutions. Since the emergence of modern Islamic finance in the 20th century, new instruments have emerged to deliver financial services to the world’s 1.9 billion Muslims.

With worldwide Islamic finance assets set to exceed $6.7 trillion in total value by 2027, Islamic finance is quickly becoming an integral part of the global financial system. The UK is widely recognised as the Islamic finance hub of the Western world - in 2014, it became the first country outside of the Islamic world to offer sovereign sukuk.

As Britain’s global orientation changes in a post-Brexit world, policymakers have an opportunity to build on this existing reputation in order to cement London’s place as the go-to Western hub for Islamic finance. Forging closer trading relationships with partners in the Islamic world, particularly in the Gulf, aligns with key UK economic and strategic goals.

Leveraging London’s reputation as a stable, reliable place to do business, the UK’s extensive financial and legal services expertise, and a favourable regulatory regime, the UK should seek to establish itself as a key exporter of Islamic finance.

In order to seize this opportunity, policymakers should consider taking the following steps:

1. The Bank of England’s Alternative Liquidity Fund should continually operate during the working week, and include an online portal for interaction by depositors.

2. The Alternative Liquidity Fund should be further digitised, moving away from encrypted email and phone banking, and move towards an online portal for

   depositors.

3. The Government should implement the recommendations of its ‘Tax Simplification

   for Alternative Finance’ report.

4. The Government should align its Capital Gains Tax rules for alternative finance with mainstream applications of the tax.

5. The Lord Mayor of London and HMT should further engage with foreign Islamic Banks, and review current structures in the City to create more effective environments for Sharia-compliant foreign direct investment.