The UK’s Supreme Court ruled on Tuesday, January 24, 2017 that the Theresa May’s government will require the approval of the parliament to trigger Article 50, upholding the ruling from the UK High Court back in November last year. The ruling was passed by an 8-3 majority after the Brexit Secretary David Davis led a four-day hearing before the Supreme Court justices.
The Supreme Court’s ruling will mean that the UK government will need a parliamentary approval in order to trigger Article 50, the formal exit mechanism for leaving the European Union, following the June 2016 Brexit referendum results.
Theresa May had previously issued a broad timetable, setting a tentative date in March to invoke Article 50. Given the circumstances, the government is now expected to publish a bill to stick to the timeline.
Jeremy Wright, the Attorney General said that the government was “disappointed by the ruling but it would comply.”
The Supreme Court’s ruling was a blow to the British PM, but the top judges ruled that there was no need to consult with the devolved administration of Scotland, Wales and Northern Ireland, which is considered to be a small victory in what is being seen as a hold up on the Brexit process. The government is not expected to lose the vote in the Parliament when the bill is introduced.
Reactions were mixed to the widely expected verdict. The Labour party said that it will table many amendments and would seek more details from the government on its negotiation strategy. The Scottish National Party, on the other hand, said that it would vote against the plan while the Liberal Democrats said that they would oppose the move unless a second referendum was held.
Reaction to the Supreme Court Ruling
Following the Supreme Court’s ruling, the Hard or Soft Brexit was back into focus.
Germany’s Berenberg Bank said that the UK’s parliament would likely nudge the government towards prioritizing access to the EU’s single market over immigration controls. “Today’s judgment tilts the risk to our long-term outlook a little to the upside,” said Kallum Pickering, an economist with Berenberg Bank. He, however, caution that despite today’s news offering some kind of a rally in the sterling the risk of clashes early on in the negotiations between the UK and the EU will remain high.
Analysts at UBS meanwhile believe that the ruling will only result in a “marginal” delay. Geoffrey Yu, head of the UK’s Investment Office at UBS said, “Sterling investors will be sending their thanks to the Supreme Court because the added complication in the Brexit timeline should see the pound gain further ground against the dollar.” Yu said that the decline in the British pound was on account of Scotland not getting a voice in the process.
ING analysts remained bearish on the sterling forecasting a fall to $1.2100 in the coming weeks. ING analysts said, “The ruling is expected to confirm parliament should have a say, but this is priced in. To boost sterling the ruling needs to demand additional conditions making ‘hard’ Brexit less likely. The ruling would need to restrict government’s future prerogative powers, its ability to make Brexit decisions, such as withdrawing from the single market, without the approval of Parliament or devolved assemblies”.
Sterling closes mixed
Despite the fact that the verdict was widely anticipated and the fact that having to put Article 50 to a parliamentary vote could delay the Brexit timeline, the sterling was broadly mixed on the day with EURGBP turning volatile although prices settled towards the closing session with EURGBP resuming its declines.
