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Expert says market reacts favorably to UK court’s decision on Brexit

November 03, 2016, 20:45 UTC+3 LONDON

Under the High Court’s decision, the British government led by Theresa May cannot on its own trigger Article 50 of the Lisbon Treaty, envisaging mechanism of withdrawal from EU

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LONDON, November 3. /TASS/. The High Court’s ruling that the British government needs parliamentary approval to start the process of leaving the EU adds uncertainty, but the reaction of the market shows that this option is more preferable, Chief Economist of the European Bank for Reconstruction and Development (EBRD) Sergei Guriev said in comments on Thursday’s verdict.

"Uncertainty is bad, but a lesser possibility of a hard Brexit is good," he said. "Within this framework it is very easy to see that the market took today’s news optimistically - the British Pound exchange rate grew two percent," he added.

Under the High Court’s decision on Thursday, the British government led by Prime Minister Theresa May cannot on its own trigger Article 50 of the Lisbon Treaty, envisaging mechanism of withdrawal from the European Union.

"The most fundamental rule of the UK's constitution is that parliament is sovereign and can make or unmake any law it chooses," said Lord Chief Justice John Thomas, England's most senior judge.

Will London lose its status as financial center of Europe? 

International banks do not rule out that London will lose its status of the international financial center, Guriev noted. 

"Certainly, all leading financial institutions situated in London are thinking about that and some of them make plans. Such work is underway in all international banks because the access to the European market is a critical portion of business of banks located in London. On the other part, today’s developments indicate that the opportunity of "hard Brexit" is lower," Guriev said.

As many as 51.9% of UK citizens (17.41 million people) voted on June 23 for leaving the European Union, while 48.1% (16.14 million) were in favor of remaining part of the bloc. Theresa May who took the helm of the UK government this past July following her predecessor’s resignation after losing the Brexit referendum, pledged to act in line with people’s will and launch the procedure of ending the country’s EU membership before March of 2017.

Meanwhile, it is not yet clear which option of ‘divorcing’ the EU will be chosen in London. Hard Brexit, in particular, envisages that the country will leave the EU single market, the move that many economists and representatives of the business community come out against. 

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