Article 50 states that any member state may leave “in accordance with its own constitutional requirements”, this ambiguity has encouraged Remainers and Brexiters to use political means to achieve their desired objectives.
Two week ago Brexit Secretary David Davis said MPs will not be allowed to vote on enacting Article 50 or formally cancelling the Brexit vote. Now, attorneys representing the UK government are stating MPs would “very likely” be able to final on the final outcome of the Brexit initiative.
As stated by the Independent:
“James Eadie QC was speaking in the High Court as part of the final day of the hearing to decide whether Prime Minister Theresa May can trigger Article 50 without parliamentary approval.”
The decision of whether Theresa May can invoke Article 50 without parliamentary approval will be announced on Tuesday October 25th, 2016.
As Chris from MacroView Research pointed out in the article There's No Exit In Brexit, The UK will have financial difficulty leaving the European Union for the following:
• The Brexit vote is a referendum and not a mandate.
• The European Union had proved numerous times to ignore or force a new vote of national elections that differ from EU objectives.
• The UK is economically on shaky ground as follows:
1. The widening trade deficit.
2. Massive public and private debt.
3. High taxes.
4. Elevated real estate prices indicate a bubble has formed.
Brexiters suggest the UK should mimic Switzerland’s model of arranging bilateral agreements with the EU. However, the UK is a weaker position than Switzerland was in 1992 despite them already being in a recession at that time when they rejected the immigration policies of the EU. After the 1992 rejection of the EU mandates, Switzerland faced an elongated recession from June 1990 through June 2003, with brief exits. The Swiss recession of the 90s/early 2000s was the longest ever of all OECD countries by rejecting the European Union’s one market mandate.
Being in the single market system is a precondition to Switzerland’s wealth and prosperity. While Switzerland achieved most of its mandates through its bilateral trade agreements, it took them ten years! Whereas the Article 50 mandate only allows 2 years to negotiate the terms of a Brexit.
Tuesday’s announcement of the of whether Theresa May can invoke Article 50 without parliamentary approval will no doubt shape the UK’s economy for the foreseeable future. If Theresa May can bypass parliament to invoke Article 50, we can expect the GBP to fall below 1.10. Furthermore, we can expect a decline in the Business Services and Finance industry which is comprised of 7% of the UK’s GDP to offset the recent growth of 0.5% in 2016 Q2 and 0.7% in 2016 Q1.
If MPs can vote on the validity of the Brexit referendum, initially the markets will see a lift but the long-term the markets will be wary until the MPs vote for the outcome of Brexit.
The GBP will face until the Brexit referendum finally draws a conclusion, then a new baseline will be established.
MacroView Research has analyzed three different Brexit scenarios and how the markets will react to the UK remaining in the EU to help our clients make sense of the noise and hedge against uncertainty.
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