No-Deal Brexit More Likely As Johnson leads In Polls

Chance of no-deal Brexit rises as Johnson leads Hunt

The chance that Britain will leave the European Union without a deal is the highest since October 2017, economists polled by Reuters say, as arch-Brexiteer Boris Johnson looks set to take over as prime minister next week.

Johnson was the face of the 2016 campaign to quit the EU and has said he would be willing to leave on Oct. 31 without a deal. The median forecast of that happening was 30% in the July 15-18 poll, up from 25% last month and 15% in May.

“The likelihood of a Boris Johnson premiership and the rhetoric which has surfaced during the campaign suggests that this outcome is more likely than we previously believed,” said Peter Dixon at Commerzbank.

With Jeremy Hunt, Johnson's rival for the premiership, also keen to display his credentials as a hard Brexiteer, sterling GBP= has plunged this week to lows not seen in over two years as investors price in the growing risk of a disorderly Brexit.

Lawmakers voted on Thursday to make it harder for the next prime minister to try to force a no-deal Brexit, giving some support to sterling, and a strong majority of economists polled still think the two sides will eventually settle on a free-trade deal, as they have since late 2016, when Reuters first started asking the question.

But in second place this month was the more extreme option of leaving without a deal and trading under World Trade Organization rules.

The third most likely outcome was the other compromise option of Britain remaining a member of the European Economic Area, paying into the EU budget to maintain access to the single market yet having no say over policy.

Fourth place went to cancelling Brexit.

As the chance of a hard Brexit has increased, so has the likelihood of a recession. The median forecast for one in the coming year was 30% and of one in the next two years was 35%, up from 25% and 30% respectively in June’s poll.