The UK Supreme Court, the highest legal body in the land, ruled on Tuesday that the British government’s prorogation (suspension) of Parliament was ‘unlawful’. Straight after the ruling, soon-to-retire Speaker of the House John Bercow confirmed that the House of Commons would resume business, as it did this Wednesday).
The ruling is viewed by some UK commentators as legally and constitutionally significant, in that the Supreme Court (which came into existence in 2009 to replace the centuries-old system of law lords) has been tested on a constitutional issue for the first time. Its ruling was unanimous, with all 11 justices upholding the verdict, which was widely viewed as a damaging defeat for Prime Minister Boris Johnson.
Vitriolic Exchanges
Recriminations have continued to echo around Westminster well after the verdict was announced, with vitriolic exchanges dominating the chamber, and causing the Speaker of the House to brand the atmosphere ‘toxic’. The government will potentially have to be more circumspect about so-called constitutional ‘creativity’ from now on, and questions over the integrity of Mr. Johnson and some of his colleagues, who have been accused of effectively misleading the Queen and the UK population, will linger.
All of this comes in the context of little material progress being made towards agreement on the terms of the UK’s withdrawal from the European Union (EU). Recent UK legislation (the ‘Benn Act’) demands that the country request an extension to the Brexit deadline from the EU, currently set for October 31, in the absence of a deal before then. However, there is a growing suspicion in some quarters that many in the Johnson administration are intent on pursuing a ‘no-deal’ Brexit, and it is worth bearing in mind that the negotiations with the EU have taken on more than a passing resemblance to a game of ‘chicken’, in which both sides wait for the other to blink first.
All Eyes on the Queen’s Speech…
Furthermore, there have been signs of a willingness to compromise on the part of the EU itself, and by Northern Ireland’s Democratic Unionist Party, which could yet offer the UK government some hope of a last-minute deal. However, the sense of anger over the government’s perceived disregard of Parliament and long-established precedents is unlikely to enhance the chances of agreement on any new proposals, especially since Mr. Johnson no longer enjoys a working majority in the House of Commons.
All eyes will now turn towards the government’s Queen’s Speech, and its proposed new legislative agenda, which is scheduled to be delivered to both houses on October 14 – just ahead of the crunch EU summit on October 17, at which the government hopes to achieve a last-ditch withdrawal deal. In the meantime, the government will focus on its attempts to find an alternative to the so-called Irish ‘backstop’, while the rhetorical repercussions of its recent judicial defeat will continue to ring in its ears around the debating chamber.
Market Implications
Sterling rallied mildly on the verdict, continuing its gently upward trend since the so-called Benn Act was passed by Parliament two weeks ago. However, we do not consider the outlook clear enough to make any significant changes to our portfolios at this time, and we will continue to favor internationally focused UK companies with little domestic exposure.
Authors
Paul Markham
Head of Global Opportunities
Any reference to a specific security, country or sector should not be construed as a recommendation to buy or sell this security, country or sector. Please note that strategy holdings and positioning are subject to change without notice.
Important information
This is a financial promotion. Issued by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Newton Investment Management Limited is authorized and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN and is a subsidiary of The Bank of New York Mellon Corporation. 'Newton' and/or 'Newton Investment Management' brand refers to Newton Investment Management Limited. Newton is registered in England No. 01371973. VAT registration number GB: 577 7181 95. Newton is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940. Newton's investment business is described in Form ADV, Part 1 and 2, which can be obtained from the SEC.gov website or obtained upon request. Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only.
Personnel of certain of our BNY Mellon affiliates may act as: (i) registered representatives of BNY Mellon Securities Corporation (in its capacity as a registered broker-dealer) to offer securities, (ii) officers of the Bank of New York Mellon (a New York chartered bank) to offer bank-maintained collective investment funds, and (iii) Associated Persons of BNY Mellon Securities Corporation (in its capacity as a registered investment adviser) to offer separately managed accounts managed by BNY Mellon Investment Management firms, including Newton and (iv) representatives of Newton Americas, a Division of BNY Mellon Securities Corporation, U.S. Distributor of Newton Investment Management Limited.
Unless you are notified to the contrary, the products and services mentioned are not insured by the FDIC (or by any governmental entity) and are not guaranteed by or obligations of The Bank of New York or any of its affiliates. The Bank of New York assumes no responsibility for the accuracy or completeness of the above data and disclaims all expressed or implied warranties in connection therewith. © 2020 The Bank of New York Company, Inc. All rights reserved.
