MENAFN – Arab News) � Bankers in London were disappointed by last-week’s announcement by British Chancellor of the Exchequer Alistair Darling in the Pre-Budget Report (PBR), He said that the UK Treasury would not be issuing a debut sovereign sukuk (Islamic securities) in the wholesale sterling market at the present time.

However, some Islamic bankers in the City advise that given the current financial crisis and the recession in the UK, the Treasury’s action is perhaps understandable and should not be construed as the Brown government’s getting cold feet in its commitment to issuing a sukuk or toward developing Islamic finance in the UK.

The Treasury, in an official statement, stressed that “after having considered these factors, the (UK) government has concluded that issuing sovereign sukuk would not offer value for money at the present time but it will keep the situation under review.” In fact, the Treasury’s Islamic Finance Experts Group (IFEG) is due to meet on Dec. 10 to discuss the situation and to review the results of the Treasury’s consultation exercise on the possible issuance of the sukuk. The official response to the consultation is due for publication in January 2009.

The UK government, it seems, is caught between two points � its requirement for good orderliness and confidence in the sukuk market on the one hand; and meeting the cost efficiency and pricing objectives for government issues of its debt management office on the other hand.

The good news is that, according to City Minister Ian Pearson, “The government is committed to promoting the City of London as a center for global Islamic finance and to working toward a level playing field between conventional and alternative financing instrument.” As such, the government announced in the PBR that “new legislation will be introduced in the finance bill of 2009 to provide relief from stamp duty land tax for alternative finance investment bonds. And in conjunction with the FSA, the government will examine the regulatory treatment of sukuk (alternative finance investment bonds) in the UK and will consult on this issue in the near future.”

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