US investment bank JP Morgan said yesterday the chances of Britain calling off its divorce from the European Union had increased after a string of humiliating parliamentary defeats for prime minister Theresa May cast new doubt over her plan to quit the bloc and sent sterling higher.
Britain's pro-Brexit trade minister Liam Fox also said it was now possible that Brexit would not happen. There was a real danger that parliament would try to “steal” Brexit from the British people, Fox told a parliamentary committee yesterday.
In one of the biggest shifts in perceptions since the shock 2016 vote to exit the EU, JP Morgan raised the probability of Britain ultimately staying in to 40% from 20%. Ever since the referendum, investors have speculated that the United Kingdom's biggest economic and political shift since World War Two could ultimately be thwarted, though it was unclear what the mechanism might be.
“The UK now appears to have the option of revoking unilaterally and taking a period of time of its own choosing to decide what happens next,” JP Morgan economist Malcolm Barr wrote in a note to clients.
He placed a 10% probability on a no deal Brexit, down from 20%, and a 50% probability on an orderly Brexit, down from 60%.
Silvia Dall'Angelo, senior economist at Hermes Investment Management, offered a similar view to JP Morgan's assessment.
“Beyond the blows of defeat to the prime minister in the House of Commons yesterday, news from the European Court of Justice that the UK could unilaterally reverse Article 50 makes a no Brexit a more realistic option.
“The government has previously denounced this route, but the road to Brexit is becoming increasingly contingent on financial markets' and businesses' ability to push the government,” he wrote in a note.
Sterling, which has see-sawed on Brexit news since the referendum, touched a 17-month low on Tuesday but recouped much of its overnight losses yesterday as optimism grew that Britain may not leave the EU without a deal in place.