The Treasury has introduced measures in Parliament to support Islamic finance and the issuance of corporate sukuk - Islamic investment bonds - in the UK.

The Financial Services and Markets Act 2000, Order 2010, introduced last week, provides clarity on the regulatory treatment of corporate sukuk, reduces the legal costs for the investment and removes unnecessary obstacles to their issuance.

Sukuk is a broad class of financial instruments designed to replicate the economic function of bonds, but with a structure which complies with Islamic principles.

Sarah McCarthy-Fry, exchequer secretary to the Treasury, said: "The government's objective on Islamic finance is to enhance the UK's competitiveness in financial services by maintaining the UK's position as a Western leader for international Islamic finance and to ensure that everyone, irrespective of their religious beliefs, has access to competitively priced products.

"This measure is another important step in the development of the Islamic finance sector in the UK and will help to provide a level playing field for Islamic financial products in this country."

The FSMA 2000, Order 2010, helps level the playing field for issuers of sukuk by explicitly exempting alternative finance investment bonds, a class of debt-like security which includes sukuk from collective investment scheme regulations.

There are currently 22 banks in the UK which deal in Islamic finance including HSBC which has an arm dedicated to it.

David Black, banking analyst for research company Defaqto, said: "Anything which assists liquidity and creates greater availability is good for the market. If it encourages more providers into the market, that has to be good for competition."