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Brexit: What Does the Betting Market Predict?

⭐ Robert Jameson
Mar 23, 2019 · 4 min read

The betting odds tell us what’s really likely to happen.

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There’s a lot of confusion surrounding Brexit. Every political commentator has their own predictions and their own stance on what they believe is the mood of the country, the Commons or the cabinet. Will Brexit actually happen? If so, when? Will there be a second referendum? When will Theresa May finally resign? Lots of people have opinions to share, but who should you believe?

Fortunately, at times like this, there is a place you can go to get some trustworthy guidance on what’s really likely to happen. And that place is the betting market. I’ve just visited Sky Bet to get the odds for this article, but I don’t place any bets. I just go there to get the truth.

The thing is that bookmakers are a hard-headed bunch. In ordinary life, they might be just as biased as most other people, but their profits usually rely on their odds being ‘truthful’ — genuinely reflecting real world probabilities.

The pattern of bets tells the bookmaker what the market ‘knows.’ If the market learns something new, a flurry of bets may quickly make that apparent to the bookmaker’s computer systems and the odds will be adjusted accordingly, to help ensure the bookmaker wins, no matter which way the bet is eventually settled. The end result of this market behaviour is that the betting markets often give us our best indication of what’s really likely to happen.

So, what does the market tell us about what’s going to happen with Brexit?

As I write (23rd March, about 0400 GMT) it’s 5/2 (‘five to two’) that May will get her deal passed by Parliament on the third attempt, before the end of March.

There are odds of 11/10 that Brexit will occur in the three-month period from April to June. That is far and away the most likely three-month period for Brexit to occur. Interestingly, the market has been saying this for months, even though May has repeatedly stated and restated her apparent determination that Brexit would happen in March. The betting markets didn’t believe her.

The current odds for leaving in March are 12/1. And we must remember to take into account that the bookies don’t offer true odds, of course, as they will also be taking their cut (often about 15% of the money staked). What all this information suggests is that it’s still slightly more likely that Brexit won’t happen by the end of June, than that it will happen by then.

Brexit not happening before 2022 is priced at 5/2. So, roughly speaking, this means that if Brexit doesn’t happen before the end of June, there’s only about a 50% chance that it will happen at all before 2022.

So, is Brexit likely to happen? According to the markets: Yes. But if it doesn’t happen before the end of June, it may be years before it happens, if it ever happens at all.

Will there be a second referendum in 2019? The market says the odds of that are 9/4 — so it’s unlikely, but still a realistic possibility.

And what’s going to happen to Theresa May? It’s 1/6 (‘Six to one on’) that she’ll be gone as Prime Minister before the end of this year, with the most likely departure date being in April at 7/2.

That’s right: April showers may come in May, but the ‘end of May’ is most likely to happen in April. Boom! Boom!

The most likely next Prime Minister is Michael Gove at 4/1. Interestingly, however, he’s only 5/1 to be the next permanent leader of the Conservative Party, with the favourite being Boris Johnson at 9/2. Since Gove is more likely to be Prime Minister than to be the Conservative leader, this suggests the possibility of him becoming a sort of interim Prime Minister, whilst a Conservative leadership election is held.

Could a general election be coming in 2019? That’s priced at evens — so, in reality, it’s a little less than a 50% chance. But if the election doesn’t happen this year, it probably won’t happen until 2022. What these odds don’t tell us, however, is whether we’d be having a 2019 general election as a way of trying to decide what to do about Brexit, or a general election after Brexit has already happened.

So, in summary: Brexit is still likely to happen and is most likely to happen at some point between the start of April and the end of June. May’s days are numbered and we may well be heading for yet another general election. But for those who are desperate for a second referendum; that’s probably not going to happen in 2019.

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Bob's Economics

Plain English Economics from someone who actually…

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