How Brexit betting ends – two scenarios

When last updating the Brexit situation and betting in September, British politics was paralysed over a process that has lasted more than three years. Guess what? It still is, although the endgame is now in sight.

The most immediate, perilous problem – a chaotic exit from the European Union on October 31st, without a deal – has been averted. Despite promising not to ask the EU for an extension and saying he would die in a ditch rather than fail to leave on time, Prime Minister Boris Johnson ultimately bowed to parliament’s demand that he do so. The new leaving date is January 31st – Jan-Jun 2020 is now trading at just $1.75 in Betfair’s Brexit Date market.

The UK now has four months to decide the terms of its departure. Johnson defied critics by securing a Withdrawal Agreement with the EU and getting it through the first stage of its parliamentary reading.

However, fearing it would be amended by opposition MPs who are either against Brexit altogether or their particular version – perhaps to attach a confirmatory referendum that could scupper it – the government withdrew the bill.

Upcoming General Election

Instead of facing that showdown, Johnson pursued a general election and today he got his wish, with the date set for December 12th.

The PM certainly has momentum. He has a deal – thus at least temporarily neutering accusations that he actively wanted a ‘No Deal Brexit’ – and his Conservative Party are well ahead of a divided opposition in the polls. They are rated overwhelmingly favourites at $1.17 to win the Most Seats.

Job done, then? Far from it. Unless they win an overall majority of seats in parliament – something the Tories have only managed once since 1992 – he will not gain control of the process. A Conservative Majority is rated around 50% at $1.96 and that feels about right. Lets, therefore, consider what happens next if they get the majority, or just fall short.

Conservative Majority = Brexit

If the Conservatives win a majority of seats – a net gain of nine on the last election in 2017 – we must assume the Brexit will be done. That doesn’t mean the end of the process. The deal is only transitional until December 2020 and the future arrangement yet to be agreed.

It is plausible that this time next year Britain will have nominally left the EU but parliament will again be bitterly divided about ‘no deal’ for the future, and seeking to extend the transition.

If you want to back a Conservative majority, it makes better sense to take the $1.7 about Jan-Jun 2020 for the Brexit Date. Why? Because the latter does not necessarily require a majority. If the Tories fall a few seats short of the target, they might still get their deal through. I doubt the odds would drift much, if at all. It makes cheap trading sense.

Hung parliament makes second referendum likelier

My enthusiasm about the ‘No Brexit before 2022’ bet advised last time has waned slightly. The odds have barely drifted from $4.00 but the original logic – that parliament would impose a second referendum – is now completely reliant on the election result.

All is not lost, though. This mid-winter election is widely billed as the least predictable ever – the first to take place in December since 1923. While the Tories lead the election polls by uniting most of the Brexiter vote, referendum polls suggest a majority of the country is now Remain. In each constituency they currently hold, the principal opposition will be a party committed to a second referendum.

Betting December’s Election

Expert opinion is split as to how these divisions will translate into seat totals and the effect of tactical voting on either side. In two of the last three parliaments, no party won an overall majority. And if the Tories fall short of that majority again, they will be back in the same place as now.

In this scenario – No Overall Majority for any party is $2.20 – a referendum becomes likelier. When the government brings the bill back to parliament, an amendment will be put forward to that effect and the majority of MPs will be bound by election commitments to support it. It could even be the price of a coalition deal with the pro-Remain Liberal Democrats.

There is now a market on an EU Referendum before 2021, for which ‘Yes’ is a $2.90 chance. I’d be less inclined to recommend that, however, than the $4.20 about No Brexit before 2022. If the Tories can’t win a majority under the current circumstances, I doubt Leave can win a second referendum.

Betting Strategy

 BACK – No Brexit Before 2022 at $4.20

 BACK – No EU Referendum Before 2021 at $1.50

Brexit Odds

Back in June 2016, the UK voted by a 52-48 margin to leave the European Union and the term ‘Brexit’ was coined. More than three years later, the UK is still an EU member and literally nobody knows when or whether Brexit will happen. The process has divided a nation and brought Parliament to a standstill.

On the 24th of September 2019 the Supreme Court ruled unanimously that the prorogation of Parliament was illegal, creating more Brexit uncertainty and betting market volatility.

Article 50

In March 2017, Parliament did vote decisively for something. To trigger the exit process known as Article 50. This was supposed to last for two years, while the government negotiated a withdrawal agreement with the EU.

However, the agreement negotiated by then Prime Minister Theresa May failed three times to gain majority support in parliament. Consequently, a six-month extension to Article 50 was agreed and May resigned. Her Conservative Party is overwhelmingly pro-Brexit and, having voted for Remain in 2016, May was never fully trusted to deliver.

Boris Leads Brexit

The UK party system is unraveling. Due to the extension, Britain had to participate in May’s elections for the EU Parliament, despite still pledging to leave as soon as possible. A new ‘Brexit Party’ was formed and won those elections easily. The combined Conservative and Labour share – over 80% in the 2017 General Election – collapsed to 22%.  

With the Conservatives under particular pressure from the Brexit Party, a new leader with stronger Brexit credentials replaced May. Boris Johnson spearheaded the Leave campaign in 2016, positioned himself against her ‘betrayal’ deal, and now says he would rather ‘die in a ditch’ than fail to complete Brexit on the new deadline. Will he?

When Will Brexit Happen?

Betfair punters aren’t convinced – perhaps not surprising given how trusting the commitments of the last PM resulted in burnt fingers. Leaving on the official date is rated only 20% likely at odds of $5.00. Anytime in 2019 is $3.10 (32%), whereas No Brexit before 2022 is $4.00 (25%).

The last is increasingly plausible because polls suggest the balance of opinion has changed since 2016. Remain would start favourite for any referendum and a recent poll showed 41% want Article 50 revoked – in other words cancel Brexit.

Can Johnson negotiate a better deal?

The new PM says he is negotiating in good faith and determined to get a deal. To do so he would need to pass the Meaningful Vote – presumably after some cosmetic changes – which failed three times previously. That is $2.74 to pass in 2019.

Brexiters have numerous problems with the deal. There is a stalemate regarding the Irish border – Ireland is an EU member but shares an open border with Northern Ireland and therefore the UK. Signing the deal also requires paying a £39BN divorce bill, which Johnson and his allies have scorned. The PM once said the EU could ‘go whistle’.

What happens if no deal can be agreed?

The logic behind backing a deal, despite those misgivings, is fear of the alternative. Without a deal, the UK would automatically exit hundreds of international agreements and have to trade on ‘WTO terms’. This outcome is regarded by a clear majority of MPs and all the non-governing parties as unconscionable. The government’s own advisors have issued apocalyptic warnings of chaos and shortages.

However, Johnson and his Brexiter allies have long criticised his predecessor for not using ‘no deal’ as a bargaining chip to get a better deal. They deride the scaremongering from a political class that never wanted to leave and is trying to thwart Brexit. 

Thus the new administration was packed with hardliners who insist – at least in public for negotiating purposes – they are sanguine about these warnings and were prepared to leave regardless of any deal.

Consequently, Johnson’s early tenure has been an unprecedented disaster. MPs formed a cross-party coalition to bring in a law demanding that, if no deal were reached by 19th October, the PM must ask the EU for a further extension. The Tory leader duly sacked dozens of colleagues, leaving them well short of a majority.

Most dramatically, Johnson took the extraordinary step of suspending parliament. Today, the Supreme Court unanimously ruled that to be unlawful and parliament will resume immediately. Nevertheless, they give every impression of being prepared to ignore that new law demanding an extension and push parliamentary and legal conventions to the limit.

Will there be an election and when would it happen?

So what precisely is Johnson’s game? It is widely believed to be a general election ploy. Without a majority in parliament, the Tories must force one soon or achieve nothing. They are trying to frame that election as a battle between ‘parliament and the will of the people’. That may well prove a vote winner – the Conservatives are rated $1.50 (67%)  to win the most seats.

The flaw is that the Tories’ lack the power to unilaterally call an election – two-thirds of MPs must support it. When Johnson tried to do so last week, it was doomed to failure. The opposition want an election but not until the prospect of that imminent no deal scenario has definitely been averted. 

Betting on the date of this election has been wild. 2019 has been matched as high as $9.00, as low as $1.06 and is now $1.42. More specifically, October 2019 was matched down to $1.25 and November $1.62. The former is now all but impossible while the latter is out to $3.00. Another option is which happens first – General Election or Brexit. An election is $1.50 and looks a banker.

Who will succeed Boris Johnson as PM?

We have an extraordinary paralysis in politics and imminent showdown. Parliament is determined to prevent no deal. The PM has staked his reputation on leaving on time. If he refuses to ask for the extension imposed on him by Parliament, opponents must try and replace him with an alternative.

To do so, they will likely call a Vote of No Confidence. That is $1.90 to take place this year and, in my view, would pass because there is no other way to stop no deal. However a new problem then emerges – forming a new government. The man in pole position to take over is Labour leader Jeremy Corbyn – a left-wing figure whom few believe could command a majority in this Parliament.

Corbyn is nonetheless $4.00 favourite to be Prime Minister After Boris Johnson. A solid enough bet, given that he could also become PM after an election. However, there are plans afoot to find an alternative, caretaker PM to be set two simple tasks – sign the extension and call an election.

This character must be a senior figure with no personal ambition. The most frequently mooted candidate is Ken Clarke – a former Tory Chancellor since sacked and about to retire. He has been backed into $9.00.

There is logic to the move but in order to win, Clarke would need Labour support. That is a very hard sell and I suspect Corbyn would only accept somebody from his own side. I’ve got two bets on this market – Corbyn at $4.30 and Margaret Beckett at $80.0. She is a former Foreign Secretary, caretaker Labour leader and notable parliamentary player on Brexit.

Betting Strategy

 BACK to LAY – No Brexit Before 2022 at $4.00

 BACK  –  Back General Election before Brexit @ 1.50

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