Goldman Sachs cuts no-deal Brexit risk to just 10 per cent and hikes chance of delay

Callum Keown
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Britain's Prime Minister Theresa May Leaves 10 Downing Street To Address Parliament On Progress In The Brexit Negotiations
The chances of a no-deal Brexit have diminished this week after Theresa May promised a vote on delaying Britain's departure from the EU (Source: Getty)

The chances of a no-deal Brexit have fallen to just 10 per cent following a cabinet revolt this week, according to analysts at Goldman Sachs.

The US investment bank’s analysts said Theresa May had created a “clear route” for parliament to rule out a no-deal Brexit after promising MPs a vote on the matter if her deal fails.

JP Morgan also said the probability of a no-deal Brexit was 10 per cent, as it maintained its scenario estimates today, and leaving the EU with the Prime Minister's deal was the most likely outcome.

Sterling has also strengthened as the no-deal risk has diminished, climbing to five-month highs of $1.335 earlier this week.

Goldman Sachs had previously said there was a 15 per cent chance of Britain leaving the EU without a deal.

They also increased the likelihood of an extension to Article 50 - to 55 per cent from 50 per cent.

“We continue to see the most likely outcome of the current impasse as eventual ratification of the Prime Minister’s Brexit deal, with a three-month extension of Article 50,” analysts at the investment bank said.

“Outside our central case, we lower the probability we attach to a ‘no-deal’ Brexit, from 15 per cent to 10 per cent,” they added.

It comes after Theresa May said that if her revised Brexit does not command a Commons majority by 12 March, MPs would vote on a no-deal Brexit the following day.

If both are rejected a vote on extending Article 50, therefore delaying Brexit beyond 29 March.

The Prime Minister’s promise was then made binding through an amendment tabled by Yvette Cooper, which was approved by MPs.

“Strictly speaking, all three exit options — 'no-deal', 'this deal' and 'no Brexit' —remain in play,” Goldman Sachs analysts said.

“But by subsuming the Cooper amendment into government policy, the Prime Minister has created a clear route for a parliamentary majority to rule out a “no-deal” Brexit on 29 March,” they added.

JP Morgan economist Malcolm Barr said: "We have been considering tweaking the set of probabilities for various scenarios we least tweaked on 13 February.

"All told, we have decided not to make any changes at this stage.

The investment gave a 15 per cent chance of a second referendum, a 20 per cent chance of a long extension to Article 50 and a 45 per cent chance of May's deal being approved.