Talks on third round of Islamic bonds at ‘advanced stage’, minister says
Chief secretary to the treasury Lucy Rigby told an Islamic finance event in parliament that a third round of sukuk is in the works
Talks about the UK government issuing a widely demanded third round of halal bonds have reached “quite an advanced stage”, Rachel Reeves’s deputy has said.
Lucy Rigby, who was appointed chief secretary to the Treasury in May, told guests at the launch of a report on Islamic finance by thinktank Equi that a third issuance of UK sovereign sukuk certificates was in the pipeline.
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And she said: “The growth of Islamic finance is likely to outpace the rest of the financial system globally.”
The chief executive of Gatehouse, a sharia-compliant bank headquartered in London, expressed hope at the same event that Andy Burnham, if made prime minister, would push through a third round of sukuk, warning that it would be a “huge backwards step” not to do so this year.
Naz Shah, the Labour MP who chairs the all-party parliamentary group on Islamic and ethical finance, also added to calls for the government to issue a third round of sovereign sukuk once its second batch of certificates, issued in 2021 and worth £500m, mature on 22 July. She told Hyphen she was due to meet the Treasury within days to press the issue and was “hopeful” of progress.
“I’d really urge them to reissue the sukuk,” said the MP for Bradford West, calling for the government to increase the value of the bond on offer. “What good looks like for me is an increase of that sukuk, and what OK looks like for me is that it reissues it as it is.”
Sukuk uses assets to generate a regular income stream that is used to pay investors an agreed rate of return over a set period of time in lieu of interest payments, which are forbidden under Islamic law.
Rigby — speaking at the Equi event, held in parliament to launch the thinktank’s report Growth with Purpose: The Untapped Potential of Islamic Finance — praised the first and second issuance of sovereign sukuk in 2014 and 2021.
“At this point, I want to acknowledge the discussions which we had around the possibility of a third issuance,” she said. “And certainly I know discussions were at quite an advanced stage when I left the economic secretary brief [in May].”
Rigby added: “What I hope is that this report can be a helpful contribution to moving the government forward on many issues, including in relation to that one.”
She had previously said in October 2025 that the government was “not at this time planning to issue another sukuk after the current sukuk matures in summer 2026”.
Equi’s report estimates the value of the UK Islamic finance sector as £6bn — and argues it could “generate £2.5bn a year for government through lower pensioner‑poverty costs among British Muslims (£1.9bn), a further sovereign Sukuk issuance (£125m) and alternative student finance (£450m) — more than the £2.3bn expected from the Australia free trade deal”.
The report notes there is strong unmet demand for Islamic finance and says it could also help millions of financially excluded adults in the UK by offering an alternative to interest-bearing debt.
On the importance of sovereign sukuk, which is used to fund government investment, Omar Shaikh, of the Islamic Finance Council, told Hyphen: “It’s like saying, ‘why do we need motorways?’ It’s infrastructure that gets the whole economy, the whole market, the whole society, communities, moving.”
He explained that the Islamic bonds are used by institutions such as banks and pension funds to construct their products and are a “really important liquidity management tool” for the former. “If you want pension funds for Muslim pensioners… how do you construct pension products without sovereign bonds?” he asked.
The UK government lauded itself as the first country outside the Islamic world to issue sovereign sukuk when it announced in 2014 that certificates worth £200m, maturing in 2019, had been sold to investors. Ministers sold a second, five-year, £500 million halal bond to investors in the UK and overseas in 2021, the government said at the time.
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Charles Haresnape, chief executive of Gatehouse Bank, told the packed parliamentary committee room Equi event that the failure to renew sukuk so far was “a huge backwards step in terms of how this market is portrayed overseas and to the market generally”. He added: “So we as a bank are now having to invest in overseas sukuk, because we have to invest in sukuk — it’s high quality liquid assets. So that’s quite bad, that’s really bad. So everyone in this room is pushing really hard to get [renewed] sovereign sukuk. But I’m really hoping Andy Burnham is a fan of the sovereign sukuk because we need that kind of stuff to promote the UK further forward as an Islamic finance centre.”
Rigby had earlier told attendees: “We can all be really, really proud that the UK is a genuine leader in Islamic finance and that is reflected of course in our status as the west’s Islamic finance capital. And that is a position that we really, really want to build on.”
The event was attended by MPs including Labour’s Afzal Khan, Abtisam Mohamed and Sarah Owen, and independents Shockat Adam and Ayoub Khan.
