THE Westminster Government could be forced to contest a second legal challenge over Brexit, it has emerged.

Campaigners have instructed lawyers to begin a legal challenge over whether leaving the European Union actually means automatic withdrawal from the single market.

The announcement from the British Influence think tank that it wants a judicial review of the UK Government came as Nicola Sturgeon made it clear she expected significant new powers to come to Scotland when the UK leaves the EU.

Theresa May’s administration is already in the middle of one major court case over Brexit.

The Supreme Court is considering whether or not Theresa May has the right to invoke Article 50 without the involvement of MPs.

Gina Miller, the businesswoman behind the legal battle, said she was optimistic the ruling would be in her favour.

She said: “I don’t believe the Government have really addressed the central legal arguments that we won on in the High Court, so we’re feeling fairly confident.”

With UK ministers waiting anxiously for the Supreme Court decision, they were also told yesterday that there could be a fresh challenge, this time over the UK’s membership of the wider European Economic Area.

The British Influence think tank believes leaving the EU does not mean quitting the European Economic Area which extends the single market’s tariff-free trade in goods to countries like Norway, Iceland and Liechtenstein.

A campaigning group behind the fresh challenge believes Britain does not need to quit the single market to control immigration, end payments to EU coffers or return powers to Parliament.

It also claims that voters did not decide to leave the trading arrangement when they backed Brexit in the June 23 referendum.

If the campaigners are successful, it could result in Westminster being given the final say on EEA membership.

Peter Wilding, chairman of the campaigning group, said: “This is not stopping Brexit, this is shaping it. The country demands a win-win, smart Brexit, not a lose-lose ideological hard Brexit which will damage the UK, damage Europe and for which there is no need and no mandate.”

However, a spokesman for the UK Government dismissed the campaigners’ arguments. He said: “The UK is party to the EEA agreement only in its capacity as an EU member state. Once the UK leaves the EU the EEA agreement will automatically cease to apply to the UK.”

Ms Sturgeon will set out the Scottish Government’s approach to Brexit later this month and it emerged yesterday that the First Minister is likely to demand Holyrood be given a wide range of new powers in the wake of the UK’s departure from the EU.

Derek Mackay, Scotland’s finance minister, has written to David Mundell, the Scottish Secretary, calling for an early meeting to clarify what powers might be devolved to Holyrood, pointing out that “there is a pressing need to consider the implications for devolution”.

He said: “We must also remember that anything not expressly reserved is, under the nature of the settlement, automatically devolved.”

Meanwhile, former first minister Alex Salmond has warned the UK Government it will be risking a fresh independence referendum in Scotland if it fails to take account of Scotland’s interests.