LONDON (Reuters) - U.S. investment bank JPMorgan (JPM.N) said on Tuesday it judges Britain has just a 15% chance of leaving the European Union by Oct. 31, down from an earlier estimate of 40%, despite a pledge by Prime Minister Boris Johnson to leave by then.
However, the bank’s analysts predict Britain will probably leave the European Union by the end of January following an election later this year - and that any departure is more likely to come by way of a no-deal Brexit than a negotiated deal.
JPMorgan sees just a 5% chance that Johnson will succeed in negotiating a new Brexit deal with the EU before Oct. 31, and a 10% chance that his minority administration will be able to overcome parliamentary opposition to a no-deal Brexit.
Previously, JPMorgan had seen a 25% chance of a no-deal Brexit on Oct. 31, and a 15% chance of a new deal.
“With the Benn law having been passed and looking Boris-proof at this stage, we mark the odds of a no-deal Brexit down sharply compared to early September,” the bank said.
A no-deal Brexit is far from being off the table early next year, however.
A delay to Brexit until Jan. 31 would give time for a new election, which the bank expects would give a 65% chance of returning Johnson to power.
“Even if any Conservative majority was small, and/or dependent on support from the DUP and/or the Brexit party, we would expect that administration to be unified behind a ‘no deal if necessary’ approach, and hence able to implement it,” JPMorgan said.
This in turn caused the bank to put a 60% probability on a future Conservative-led administration taking Britain out of the EU without a deal by the end of January, and a 40% chance that it would manage to negotiate a new transition agreement.
By contrast, a Labour-led administration would probably ask to delay Brexit further in order to renegotiate and hold a second referendum on EU membership later in 2020.
“Put all of that together, and you have a 39% chance of no-deal at end January, a 26% chance of leaving with a deal at end January, and a 35% chance that the UK’s EU membership continues beyond end January on the basis that a referendum is planned for later in the year,” the bank said.
Reporting by Guy Faulconbridge and David Milliken; editing by Costas pitas