LONDON, ENGLAND UK ( (BANK OF ENGLAND) – The Supreme Court ruled on Tuesday (January 24) that Prime Minister Theresa May must get parliament’s approval before she begins Britain’s formal exit from the European Union.
The UK’s highest judicial body dismissed the government’s argument that May could simply use executive powers known as “royal prerogative” to invoke Article 50 of the EU’s Lisbon Treaty and begin two years of divorce talks.
However, the court rejected arguments that the UK’s devolved assemblies in Northern Ireland, Scotland and Wales should give their assent before Article 50 is invoked.
Sterling initially rose on the news that the government had lost its appeal, but it then fell over half a cent to hit day’s lows against the dollar and euro after the court ruled that Britain’s devolved assemblies did not need to give their assent to triggering Article 50.
“So we’ve seen an initial drop lower in the pound, which is surprising for some because the greater parliamentary scrutiny has actually tended to be pound-positive. But we think the fact that the Supreme Court did not hold up the Sewel Convention, which basically means they don’t need to consult the devolved parliaments of Northern Ireland, Wales and of course Scotland, could actually trigger some tension, particularly with Scotland. And that this decision may sow the seeds of a potential second independence referendum for Scotland down the line. So that’s why we think we’ve seen a bit of a mixed reaction in the pound but on balance, the greater parliamentary scrutiny tends to be pound-positive so we’re not writing the pound off quite yet”, said Kathleen Brooks, Senior Markets Analyst at City Index.
May has repeatedly said she would trigger Article 50 before the end of March but she will now have to seek the consent of lawmakers first, potentially meaning her plans could be amended or delayed, although the main opposition Labour Party has said it would not slow her timetable.
“So we think it’s more a formality. If anything this decision actually makes it quite likely Theresa May will be able to trigger Article 50 by the end of March, which is part of her timetable. Yes, she has to put this plan to a parliamentary vote but we think it will pass the vote. Obviously there are still some hiccups in the House of Lords but ultimately you know the country voted by a majority to leave the European Union so we’d expect that to be reflected in parliament. So I think there will be a little bit of market fear because now it does make Brexit a reality, and a near-term reality, not just something that’s far away that we don’t know about. We will be likely to see Article 50 being triggered in the next couple of months”, Brooks said.
Last week May set out her stall for negotiations, promising a clean break with the world’s largest trading block as part of a 12-point plan to focus on global free trade deals, setting out a course for a so-called “hard Brexit”.