Brexit: How to Cash in on the Betting Bonanza

If Betfair’s markets are any indication of how likely the U.K. is of leaving the European Union on time, then that prospect looks to be fading fast. This follows a truly remarkable couple of days in in parliament which now leaves the U.K in a state scratching their head on when Brexit will actually happen.

To further explain the events and cast an eye on the next 12-24 months in this space, our political pundits are back on deck.


What is Brexit?

Brexit is the process of Britain exiting the European Union – an organisation they joined in 1973 but voted to leave via a 2016 referendum. The official exit date is March 29th, 2019 when the withdrawal process known as Article 50 expires. Deep uncertainty, however, persists regarding whether or when they will leave, or what the relationship will be moving forward.

How this unprecedented and complicated process unfolds is also a multi-faceted betting heat, driven by very fast-moving, unpredictable events. The facts will likely have changed by the time this article is finished.

As things stand, the UK will leave on 29/03/19 and, after two years of farcical negotiations, the government has agreed a withdrawal deal with the EU. If the consent of the UK and EU parliaments is secured, a lengthy transition period will guard against immediate, dramatic consequences. The most difficult questions will be delayed.

If parliament rejects the deal, though, all manner of disruption involving everything from trade, transportation, medicines and food security is widely predicted. Even proponents of ‘no deal’ – in which scenario the UK would trade on WTO rules – acknowledge it requires preparation and management which the government has failed to do.


Why the chaos?

The problem is that Prime Minister Theresa May’s deal pleases hardly anybody. As in 2016, the population is broadly split 50/50. Remainers hate a deal that is worse than the status quo. Leavers dismiss it as ‘Brexit in name only’ – a trap that would result in colony status. In expectation of humiliating defeat, May cancelled last week’s parliamentary vote on the deal.

As a result, Conservative colleagues triggered a confidence vote in her leadership of the party. She survived it by an unconvincing margin, blocking a new challenge for another year, but pledged to stand down before the next election. She is fatally wounded and rated around 70% likely to leave office in 2019 at 1.44.

The vote on her deal is now re-scheduled for mid-January. Few expect it to win, because her attempts to secure concessions from the EU will not materialise. At this point, all hell will break loose as parliament tries to take control of the process.


What happens next?

Betting on Brexit is nothing like an election or even leadership contests. This puzzle involves predicting the choices of politicians, as opposed to voters. The party leaders are restricted by factional and electoral considerations. Literally nobody knows how, if ever, Brexit ends.

Parliamentarians are no less divided than the wider country and have taken various positions. Most voted to Remain. Most then voted to trigger the Article 50 process to leave, and were elected in 2017 on that promise to deliver Brexit. Most – both Remainers and Leavers – now believe the deal on offer is a bad one. Most believe leaving without a deal would be a disaster.

It is not, therefore, straightforward to predict how they will react, assuming the deal fails and the UK remains two months away from what they call a ‘cliff edge’. Here’s my best guess as to how it pans out, and how to bet on each stage.

First if it hasn’t happened already, Labour will attempt to force an election via a no-confidence vote on the government. A General Election in 2019 is trading at $2.5. I’m a layer. Jeremy Corbyn won’t have the numbers to unseat the Tories.

BETTING STRATEGY

 LAY (WIN) Next General Election  2019


Brexit to be delayed for another referendum

Next a backbench amendment will be passed to block a no deal outcome. That will focus minds upon a way out of the impasse and, with no immediate solution, the government will be forced to secure an extension to Article 50, thus delaying the Brexit date. The markets have wised up to this already – Brexit – UK to leave the EU by the 29/03/2019 has drifted from $1.39 to $2.6. 

 

$9.8 about July-Dec 2019 in the tri-monthly market appeals as a trade.

BACK (WIN) Brexit Date

A condition of extending A50 will likely be that the UK has a second, legally binding referendum to end the uncertainty. Putting the question back to the people will become the least, worst option. A 2nd In/Out Referendum before 2020 is rated a 2.5 chance. I’m on and expect it to shorten. 

BACK (WIN) EU Referendum before 2020?

Beware these rules. May will initially go for a referendum between her deal and no deal, thus excluding Remain from the ballot and failing to land the ‘In/Out’ condition of the bet. I expect a backbench amendment will eventually succeed in getting it on the ballot paper – given that it represents the view of half the population and formerly most MPs.

The Prime Minister and her supporters would scoff at this idea. They are adamant that Brexit will be delivered on time and another referendum is out of the question. They must say that, because the overwhelming majority of Tory voters and members are pro-Brexit. They do not have a majority in parliament, though, and will be forced to its will.

If backbench MPs from all parties spearhead the amendments forcing the referendum, that may suit everybody. Sharing the blame around and to some extent sparing the leaders from direct responsibility. Labour for instance are torn by the fact that their supporters overwhelmingly back Remain but most of their MPs represent areas that voted Leave. Any public backing for another referendum will be reluctant, muted and last minute.

Plus a growing number of prominent Tories are coming around to the idea. Not only is a referendum becoming inevitable but even desirable, to end the nightmare. The Conservative Party is famously obsessed and bitterly divided over Europe. Even if leaving on time, fraught negotiations about the future EU relationship will last years and exacerbate divisions.

The fallout is already unavoidable. The race to succeed May as party leader is well underway and could go live at short notice if she is forced from office. My prediction is that will come after the referendum is called, as she couldn’t possibly lead the party during that campaign.

Next time I’ll analyse the leading contenders for a particularly wide-open renewal of a famous political market. UK – Party Leaders – Next Conservative Leader 


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