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Q&A: The big issues around Brexit now

A display of U.K., Union Jack flags fly in front of The Houses of Parliament, in London, U.K., on Monday, Feb. 15, 2016.
Jason Alden | Bloomberg | Getty Images
A display of U.K., Union Jack flags fly in front of The Houses of Parliament, in London, U.K., on Monday, Feb. 15, 2016.

The U.K.'s government's plans for a Brexit from the European Union were thrown into disarray Thursday by a High Court ruling that lawmakers must be involved in the process. Now the dust has settled, CNBC looks at Brexit's big questions.

What did the ruling actually change?

Prime Minister Theresa May's government had argued its "royal prerogative" would allow it to trigger Article 50 to get the official process of the U.K.'s withdrawal from the EU started without having to win legal authorization from the British parliament. The London High Court ruling instead sided with campaigners who claim parliamentary approval is a necessary precursor to the government firing the starting gun on official exit talks.

Does this mean there won't be a 'hard' Brexit or even any Brexit?

All we can say at this point with confidence is that the process will likely be dragged out. The government is set to appeal in the Supreme Court with analysts at Julius Baer saying a final judgment on the matter "should" be available by year end. If an appeal is denied, members of parliament (MPs) would get a greater say in the government's negotiations with the European Union (EU) which could lead to lengthy debates over various contentious aspects of the exit process such as immigration. There would also be the possibility of a parliamentary vote on the issue and the question over what the next step would be if Brexit was voted down by MPs. If MPs pushed back hard, it could make May's pledge to trigger Article 50 by March 2017 seem ambitious.

Can the people's vote be ignored?

The vote was not legally binding so from a technical standpoint the government and parliament have no legal obligation to proceed with a Brexit. However, although the majority of MPs voted against exiting the EU, the U.K. runs a parliamentary democracy so it is seen as unlikely they would seek to ignore or deny the electorate's choice. In the words of Citi's Chief Political Analyst, Tina Fordham, "In our view they will not block the invoking of Article 50 out of respect for the democratic process."

Is the UK headed for another general election soon?

British Prime Minister Theresa May
Kirsty Wigglesworth | AFP | Getty Images
British Prime Minister Theresa May

The risk has certainly increased according to Citi's Fordham who says, "There are multiple MPs from the government and opposition calling for or predicting new elections. The latest developments raise the risk of early elections next year from a low probability to a rising and non-negligible one." In some ways this could be good for May if she won as it would deliver her a clear democratic mandate that was denied to her by virtue of being appointed by the Conservative party not the electorate in the wake of the resignation of her predecessor, David Cameron. Her party also leads strongly in the latest polls taken by YouGov this week which measured voting intentions and put May's Conservatives on 41 percent compared to Labour's 27 percent, UKIP's 11 percent and the Liberal Democrats' 10 percent.

What's next? We ask a legal expert

According to Charles Brasted, Partner at law firm Hogan Lovells:

"The Supreme Court will be acutely aware that this claim raises constitutional issues of the highest importance, and puts the constitutional role of Judges themselves in a fierce spotlight. An appeal to the Supreme Court was anticipated from the outset, whichever way this hearing went, and we can be sure that the Judges will look rigorously at the issues and not shy away from reaching their own conclusion. We know that among the Justices there are a range of opinions. However, the three very senior judges in the High Court were unanimous in their conclusions and it is clear that they did not regard this as a finely-balanced case."

How did markets react?

Sterling bounced to its highest level against the US dollar since early October closing at 1.24592, while the FTSE 100 dropped to its lowest point since September, ending the session at 6,794.7. These factors are closely interrelated given that a sizeable portion of revenues made by companies listed on the main London index are generated in US dollars. The perceived risk for sterling of a Brexit was outlined by Bank of England Governor Mark Carney on Thursday when he explained the currency's rapid depreciation since the Brexit vote, saying: "Market intelligence attributes these latter movements to perceptions that the United Kingdom's future trading arrangements with the EU might be less open than previously anticipated,requiring a lower real exchange rate to improve competitiveness and support activity."

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