In ten week’s time, the UK will vote on arguably it’s most important political decision in over 40 years, regarding membership of the European Union. After considering and debating the question for 20, the time has come to bet on it.
I’m still loathe to make a definitive prediction about the result. The current odds – 1.48 (68
%) for Remain, 3.05 (33%) for Leave, strikes me as more or less accurate.
That reflects polls showing Remain slightly ahead with a large number of undecideds. In the four conducted over the last month with no more than 10% undecided, Remain was ahead by an average 4%.
There is no obvious short-term trading angle on that main Brexit market. If the polls continue to show Remain ahead, those odds will slowly shorten throughout the next ten weeks. However as we saw in the Scottish Independence Referendum, a rogue poll or even a short-term trend can panic the political establishment and spook the markets. Why take the risk at such an early stage, especially when there are plenty of other betting options?
As always, my primary aim is less about picking an eventual winner, than correctly predicting the trajectory of the market. Get the early value, cash out later. The best place to do this is in the Remain Vote Percentage market.
The early odds suggest a wide-open contest, with extreme one-sided results at big, but not dismissive odds. I simply cannot see it happening. The twenty-odd percent of undecideds may be precisely that – the lack of neutral information is a common complaint – but most of the rest, in my view, are pretty fixed.
The UK has a long, deep history of Euroscepticism, particularly among Conservatives but also across society and within the wider national conversation. The press is overwhelming Eurosceptic. UKIP – fundamentally an anti-EU protest party with a toxic image and very unfavourable approval ratings – won 4M votes at last year’s General Election.
The subject has been polled for many years, with the percentage for Leave averaging somewhere in the forties, occasionally ahead. Having spent a lifetime taking a stance on this deep and emotive question, Eurosceptics are not going to miss their once in a lifetime chance to vote on it. They are surely likelier to vote than Remain supporters.
That doesn’t mean they will win the referendum but 40% looks an unambitious floor. If so, that rules out about 17% of the book from the top-three bands on Remain Vote Percentage.
My current prediction is 52-48 to Remain, basically in line with the polls. Undecided voters have a tendency to swing late towards the status quo. This small segment of the electorate could be susceptible to Project Fear from the government, opposition, big business and trade unions. The UK’s median political outlook is ‘small c’ conservative, risk-averse. However lower turnout among Remain supporters will limit the effect of that gamechanging advantage.
That prediction is bang in the middle of my selection for Remain Vote Percentage. 50.01 – 55% is available to back at 3.8, equivalent to 26%. A cheap price about what is an extremely conventional prediction. Unless the polls change quite dramatically, these odds are only going to shorten.