Odds markets for a range of possible outcomes associated with Brexit have been subject to major revisions over the last 24 hours as Theresa May’s request for a re-opening of negotiations was reproved by the EU’s chief negotiator, Michel Barnier.
Prices on PredictIt – a wisdom-of-the-crowds platform that allows for trading in shares priced between 0 cents and 100 cents on certain political outcomes, corresponding to a market-defined equivalent probability – witnessed a leap from 24c to 38c within the space of twenty-four hours on Brexit being implemented as per the original 29 March schedule.
The sudden climb has effectively wiped out a downward trend dating from mid-December which had indicated that most analysts saw an extension to Article 50 as the most likely outcome.
However, with an increasing number of Brexiteers interpreting any move to stall the UK’s exit as an attempt to reverse the referendum result of July 2016, the BBC is indicating that “a few dozen MPs” have signaled that they will resign, should Prime Minister Theresa May opt to prevent a No Deal scenario.
No Deal Scenario Looming Closer
Odds on a No Deal scenario itself have also been falling. Whilst most MPs – along with most of the British public – would prefer to avoid the uncertainty associated with a No Deal outcome, there is no other option on the table that currently enjoys any kind of significant support.
As a result, a number of political commentators are beginning to sense that the outcome has a significant – and growing – chance of arising by default. Paddy Power is currently pricing a No Deal outcome at 5/4, corresponding to an implied probability of 28%, revised downwards from a previous price of 6/4 less than a fortnight ago.
Perhaps most significantly, however, is that PredictIt is pricing odds on a second referendum at an all-time low of 12c, down from 50c in mid-December when the market had judged the outcome as an essential coin toss.
With a second referendum likely now off the cards, and no viable alternative presenting itself with majority parliamentary support, current odds on a No Deal outcome may now have wandered into value territory.