GBP: UK Court Ruling: Scenarios & Market Implications

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On Tuesday, the UK Supreme Court will rule on the government’s Brexit plans. The case is less of a market focus than the original hearing in November, but could be just as important for the Brexit process. 

What issues are at stake? The ruling concerns the appeal of government lawyers against the High Court’s judgment in November that parliamentary approval must be sought before the triggering of Article 50 (A50), the political process governing Brexit. 

The Supreme Court is widely expected to uphold the original High Court decision and reject the government’s appeal. The government has confirmed that if this is the case, it will introduce primary legislation to enable the triggering of A50 along the lines of a very narrow bill with limited or no restrictions over the government’s negotiating position from parliament.

Scenarios and market implications (assuming government loses appeal)

Scenario 1: Government loses appeal but wins parliamentary vote on narrow Brexit Bill - 50% probability 
Scenario 2: Government loses appeal but loses parliamentary vote on narrow Brexit Bill. Snap general election then most likely outcome. – 20% probability 
Scenario 3: Supreme Court rules that devolved authorities must be consulted before triggering of A50 or 1972 EU Communities Act repealed or ECJ opinion consulted – 30% probability

The bottom line is that details rather than headlines will matter tomorrow. Our base case remains that the government will lose the Supreme Court appeal but succeed in introducing a narrow bill enabling a triggering of Article 50 by the stated end-March deadline.

Should scenario 2 or 3 materialize, however, the government’s Brexit plans would be compromised, and an at least short term correction in sterling would be justified.


In case the Supreme Court will agree, Ms. May would need parliamentary approval from the Scottish and Welsh assemblies, as well. Taking Scotland’s opposition in relation to Brexit, such result would most certainly be not in favor of the government.

The research team at TDS has stated:

“After PM May’s Brexit speech last week, which dealt with some of the bigger Brexit issues, how exactly Article 50 gets triggered doesn’t seem all that important anymore. We look for the Court to rule that Parliament must vote to trigger Article 50, but any rally in GBP should be short-lived.“

They believe that the following two potential announcements will impact GBP:

1) Wales, Northern Ireland, and Scotland are all required to agree on the Article 50 invoke process

2) the Great Repeal Act needs to be approved first. Read more... 

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