Article 50 ruling likely to cause delay, warns challenger bank

The Supreme Court voted by a majority eight to three to dismiss the government’s appeal against the decision that parliament is required to vote before the UK can leave the European Union. 

The government said that it respected the decision, but was confident that it would trigger Article 50 as planned by the end of March. 

“It’s important to remember that parliament backed the referendum by a margin of six to one and has already indicated its support for getting on with the process of exit to the timetable we have set out,” a spokesperson stated.

However, Rishi Khosla, CEO of OakNorth Bank, stated: “Today’s decision by the Supreme Court means that Article 50 is unlikely to be triggered by the March deadline set by Theresa May. 

“This delay means continued uncertainty, which could result in a decrease in demand for property development finance.”

Some property investors have remained cautious post-Brexit 

Investors and lenders may be nervous 

Ashley Ilsen, head of lending at Regentsmead, feared that the decision would increase uncertainty in the property market.

“While Brexit itself brings about more questions than answers, we still don't know anything about timescales. 

“The longer this level of uncertainty continues, the more damage it will do to our economy, and to our property market, which may make investors and lenders nervous. 

“Lenders that aren't self-funded, like Regentsmead, may start to feel the strain of this over the coming year.”

However, although a government defeat was widely expected, Mike Strange, managing director of Funding 365, felt the ruling would create doubt. 

“I think it is highly unlikely that today’s Supreme Court ruling will cause anything other than a very short period of uncertainty.  

“Most uncertainty will likely come when parliament has to vote on the actual terms of Brexit – that is probably two years away, so uncertainty is here to stay for the medium term.”

Bret Jackson of Finance 4 Business questioned why there should be further obstacles in the way.

“Organisations alike have been told when Article 50 was going to be invoked and Mrs May had delivered a speech explaining all. 

“Funding channels are always a concern, but many of the lenders are more prepared and have arrangements in place. 

“Some of the new banks have access to deposits as a channel, so can control this more efficiently, hence the price war we are seeing in the bridging market.”
 

Theresa May plans to enforce Article 50 at the end of March 

AJ Shazad, manager of credit risk at Zorin Finance, felt that the impact of the Supreme Court’s decision would be minimal, but felt there was no denying that risk would have increased due to uncertainty within the marketplace.

“This factor together with the maturing global economic cycle, rising inflation and bond yields are likely to lure institutional investors out of property. 

“However, companies are now better prepared for these types of scenarios following the referendum last year (reflected by the share price recovery of the housebuilders and REITs [real estate investment trusts]).”

AJ also felt that the residential property sector on closer inspection would likely be rather less embattled by the court’s decision.

“…There continues to be strong demand for affordable residential properties with supply constraints; the mortgage market is very strong with low interest rates; the government continues to support first-time buyers with schemes such as Help to Buy; and the weak sterling appeals to foreign buyers.”

Rishi said that OakNorth had seen an increase in demand since the vote in June with many developers keen to get on with things, but said there were still some who had fears.

“…There are some who have put plans on hold until they have a better idea of what the future holds. 

“For these individuals, clarity on the government's position and guarantees of further investment in the sector would go a long way in encouraging them to take their foot off the brakes.”