It runs on similar lines to Beth Din, the Jewish courts.
There is nothing wrong with a group of people, whether they are united by religion, an association or business, having their own system of rules that they choose to adhere to and administer themselves as long as those rules do not contradict the laws of the land.
For example, a couple who believe in fairies are in love and want to get married. They can have a fairy wedding if they wish, they can sign the fairy register and have the marriage recognised as binding by other fairies. It will not be a legal wedding under UK law, they will have to have a least a civil wedding officiated by an official Registrar.
A good article here about religious courts in the UK:
http://news.bbc.co.uk/1/hi/uk/7233040.stm
To say that sharia law is practiced in Birmingham and Manchester is a bit of a bold statement. The vast majority of Muslims have no problem applying the rules of their religion to UK laws and don't wish to impose those rules on non-Muslims. Sharia law concerning divorce can be adhered to in the UK but the divorce won't be lawful unless proper divorce procedure is applied and a court grants the divorce absolute.