A pedestrian passes a branch of the Islamic Bank of Britain in Birmingham. The UK wants to become a global centre of Islamic finance, hoping to secure a slice of an industry growing at 17% a year and set to be valued at $2.7tn by 2017, according to PricewaterhouseCoopers.

Bloomberg/Dubai

The UK is strengthening ties with members of the Gulf Co-operation Council before issuing its debut Islamic bond, three years after it abandoned a sale.

A framework accord signed last week with Bahrain to “enhance collaboration” in Islamic finance, follows visits from foreign office minister Sayeeda Warsi and the Lord Mayor of the City of London to the region.

A Qatari Islamic bank representative also met the minister in London as the UK prepares to sell £200mn ($335mn) of sovereign sukuk backed by government property this financial year.

The UK wants to become a global centre of Islamic finance, hoping to secure a slice of an industry growing at 17% a year and set to be valued at $2.7tn by 2017, according to PricewaterhouseCoopers. The government has weighed the sale of Islamic bonds since at least 2007 and cancelled a planned issue in 2011 because it was “judged not to provide value for money.”

“By really strengthening these relationships, they’re raising the certainty that the sukuk sale will be a success,” Rizwan H Kanji, Dubai-based partner at law firm King & Spalding, said by phone on Sunday. “If you look at who the big investors in sukuk are, they’re in the GCC countries. It makes sense to line-up friends in those jurisdictions.”

The UK treasury appointed HSBC Holdings and Linklaters as advisers to the planned sale, according to an April 1 statement. The treasury press office didn’t immediately respond to an e-mail seeking comment yesterday.

About one third of all Islamic bond sales so far in 2014 came from the six-nation GCC, according to data compiled by Bloomberg.

“The outreach we have seen is definitely designed to ensure smooth uptake of the upcoming sukuk, particularly as it is likely to attract interest from Gulf state-owned enterprises looking to diversify their treasury exposure,” Emad Mostaque, a London-based strategist at Noah Capital Markets, said by e-mail on Sunday.

Global Islamic bond sales fell to $10.6bn in the first three months of the year, data compiled by Bloomberg show, the worst start since 2011, as slower growth in China cast doubt on the economic recovery and crises from Turkey to Ukraine roiled developing-nation assets.

The UK in 2011 pledged to “keep the situation under review” when it decided not to issue a sovereign sukuk because the deal didn’t offer value for money. There is no guarantee a sale will go ahead this time because the cost of borrowing always remains uncertain, Kanji said.

The memorandum of understanding signed by the UK’s Warsi and Bahrain’s central bank governor Rasheed al-Maraj set out plans for a working group on Islamic finance-driven trade and investment, according to an April 8 statement. Warsi visited the GCC in September, while City of London Lord Mayor Fiona Woolf visited in February. The chief executive officer of Qatar International Islamic Bank met Warsi in London last month.

 

 

 

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