So the news has just landed that UK Prime Minister Boris Johnson has agreed a Brexit deal with the EU.
Attention now turns to the UK Parliament and what is being dubbed “Super Saturday” as MPs are asked to pass the deal.
Whatever your views on Brexit – and lots of people just seem fed up with it all at this stage! – the betting markets make for interesting viewing at the moment and there is the potential to make some profit trading the markets as events unfold. Let’s take a look at what’s happening at the moment and the betting markets on Brexit.
Boris Johnson and the EU are obviously keen to see the deal be approved by Parliament and for the Brexit question to be finally settled. However, what chance is there that the deal will actually get through? The DUP have come out against the deal on the basis that it effectively sets Northern Ireland on a separate regulatory framework to the rest of the UK and could end up with added pressure for Irish reunification.
Will the Deal Pass? How the Numbers Stack Up
There are currently 650 MPs in the House of Commons, but with Sinn Fein not taking their seats and the Speaker not voting, Boris Johnson needs about 319 votes to pass his deal.
It is said he has around 259 votes already guaranteed, so that leaves about 60 more to get. Here are the various groups Johnson could potentially get those votes from:-
The group seen as most crucial to a deal has always been the DUP, the Northern Irish MPs who prop up the Tory government. They indicated this morning they would not support the deal. However, if large amounts of cash are thrown their way by Boris Johnson, it is possible they may change their minds.
Last time there were 28 so-called “Spartans” of hard-core ERG members who voted against Theresa May’s deal every time it was brought forward. This time though most of them are expected to vote for Boris Johnson’s deal as he has removed the controversial “backstop” which ERG members objected to. It is predicted that only a handful of ERG members will vote against the deal this time, giving perhaps 23-25 extra votes to Johnson’s deal.
Then you have the 21 ex-Tories who were expelled from the party for voting for the Benn Act to extend the Brexit deadline if a deal was not agreed by 19th October. Of those 21, at least 4 are expected to vote against the deal, leaving 17 others. Most of those 17 are expected to vote for the deal, although a few like Philip Hammond and David Gauke are still unknown.
You also have 21 opposition MPs who have said they would consider voting for a deal, but at this stage it is very unclear how many of them actually will. Which way this group swings may determine the outcome.
Finally there are five independents, four of whom voted for May’s deal so would be expected to vote for Johnson’s deal as well. The major question mark is over Jo Johnson, the Prime Minster’s brother, who resigned over Brexit but is still an unknown quantity at this stage.
Adding It All Up
So let’s add up those numbers, looking firstly at those either sure or likely to vote for the deal:-
- – In the bag: 259
- – Likely: 24 ERG members
- – Likely: 14 ex-Tories
- – Likely: 4 Independents
Next those whose position is unknown currently:
- – 21 opposition MPs
- – 3 ex-Tories
- – Jo Johnson
Finally you have those currently expected to vote against the deal:
- – 10 DUP
- – 4 ERG members
- – 4 ex-Tories
So in summary with those expected to vote for the deal, Johnson is still about 18 votes short of getting the support he needs. He needs to get either all the opposition MPs on board, or the DUP plus some opposition MPs.
The Betfair Odds on Brexit
Currently Betfair has the chances of a Meaningful Vote passing in 2019 at just over evens, around 2.1 – 2.2.
Given the numbers above those odds look a little optimistic, unless opposition MPs swing behind the deal – which looks unlikely unless the government guarantees workers’ rights and environmental protections.
So this is not something we would back currently. You could even lay it as at least a trade to back later as the realisation emerges that passing a deal is unlikely.
At the same time, Betfair currently has the odds on the UK leaving on 31st October at 3.3 – which seems a contradiction to the market above. Unless of course the market is presuming the UK will need a short extension just to finalise the legislation and get it all done. The discrepancy in the two markets seems large though and could be worth trading one against the other as if a deal passes there will be every effort imaginable to get everything done by the end of October.
Another possibility is that Johnson’s deal could fail and then the question is what happens next.
A no deal Brexit in 2019 is currently at 6.2 on Betfair, so the market seems to be taking at face value the idea that Johnson will comply with the Benn Act and request an extension if a deal is not secured on Saturday. However, he has constantly repeated that the UK will leave on 31st October “do or die” and has staked an awful lot on that outcome. It has also been suggested that a backup plan is in place to avoid having to request an extension.
At the same time, if just one EU member refuses an extension, it won’t be granted. And Jean-Claude Juncker has just ruled out an extension (although commentators have pointed out that he doesn’t have the authority to decide that and it is up to EU member states so shouldn’t be taken at face value).
In any event, overall the odds of a no-deal Brexit happening still seem on the high side at 6.2 so a small stake here with the option of trading out later could be considered.
General Election Odds
There is likely to be a general election fairly soon and at the moment the odds look well out of step with the polling. Whilst the Tories enjoy big leads in the polls ranging from 5 to 15 points, with an average lead of about 8 points, they are still around 2.60 to win an outright majority on Betfair.
The complicating factor is that the national polling is unlikely to work quite as simply as normal in the next election as the Tories are likely to be wiped out by the SNP in Scotland and suffer serious losses to the Lib Dems in the South-West of England and London, meaning they will have to make up ground in Labour’s heartlands in the midlands and North.
At the moment we think given Jeremy Corbyn’s historically poor approval ratings and leave voters switching heavily to Boris Johnson from the Brexit party, this is looking increasingly likely and the 2.6 about a Tory majority looks like great value, as does the 1.35 about them winning most seats.
The only caveat is that a lot could happen between now and an election, so this would not be a market to be getting heavily involved in – at this stage anyway.
So there you have it – our take on the current betting markets around Brexit. Things move at a rapid pace these days and a lot could happen on Saturday, so it’s best to stay on top of things and be ready to trade markets as they move.
Whatever happens it should be interesting viewing!