Churchill’s support for UK Sukuk


I recently attended a fascinating Sukuk summit organized by Her Majesty’s Treasury. With representatives from the Treasury, Revenue & Customs as well as the lawyers and bankers involved with the UK’s sovereign Sukuk issue earlier this year, the purpose was to encourage UK corporates to consider their own Sukuk issues.

Held in the ‘Churchill Room’ of HM Treasury, named after having been the location where my namesake appeared on the balcony to declare victory in Europe towards the end of World War II, the room was filled with many of us from the Islamic finance world, as well as a healthy number of corporate treasurers.

With the audience reminded that real estate makes a perfect asset on which to base the Sukuk, we learned that three of the UK government’s London properties were used for the GBP200 million (US$321.73 million) issue, being duly valued and assessed for Shariah suitability during the process.

Sharing more of the detailed structure work that was undertaken it became clear that considerable work was required to satisfy the requirements of all involved, such work which had not been evident when externally everyone was impatient for the launch.

Asked whether the UK government would be issuing further Sukuk, whilst acknowledging that the pricing had been on a par with conventional bond issues and that the demand had been phenomenal with a GBP2.3 billion (US$3.7 billion) order book oversubscribing the issue more than 10 times, the audience were encouraged to view the UK government’s issue as a further proof point for its support for Islamic finance in the UK, but to consider corporate issuances as the natural next step.

Inspired by the support shown, many in the room (including myself) were running through scenarios where further Sukuk issues could result, with finance for infrastructure projects being one possibility.

Whilst I fear that it may take a little longer than most people think for material corporate Sukuk issuances in the UK to come to fruition, but with the support of HM Treasury, the tax rule changes from HM Revenue & Customs and the enthusiasm among those of us in the real estate industry, hopefully it won’t be too long.

Author Philip Churchill