The problem is caused I believe by the way you have edited the file, probably using something like Adobe Golive?
Whatever, your editing package has kindly decided to some extra editing!
In this case altering { to %7B and } to %7D!!
what it should of course look like is:
http://www.Mysite.co.uk/{$http_location}
This would have been caused in skin1/head.tpl
You will also get a similar problem with images location - {$ImagesDir}
If you are using Golive, you may need to change your templates to text files not html files to edit them.
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