Investment Clock insights

High Court ruling on Article 50

Ian Kernohan

4 November 2016

The High Court has ruled that the government cannot trigger Article 50 (A50) without the consent of Parliament. They did not define what type of consent would be needed and the government have now appealed to the Supreme Court to clarify the situation, with a hearing set for early December. We feel a motion to trigger A50 would not be blocked by the House of Commons (HoC): only a few MPs voted against the EU Referendum Bill, so the validity of a referendum outcome should not be in dispute.  If new legislation is required however, this will also need to be passed by the House of Lords (HoL). Any repeated blockage by Parliament could prompt the government to call an early election, although this process is now less straight-forward since the introduction of fixed-term parliaments: it would require a 2/3 majority in the HoC, or the government to lose a vote of confidence.

So we now have uncertainty piled on uncertainty: the uncertainty created by the A50 trigger itself, and now the uncertainty about when or whether A50 will be triggered, not to mention a possible General Election. Although sterling has bounced in an attempt to price in a higher chance of a so-called “Soft Brexit”, we think this is premature. Even assuming Parliament attaches conditions to the Government’s A50 strategy, it is up to the EU to agree to these. Meanwhile, increased uncertainty makes us more, not less concerned about the UK economic outlook.

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.