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JP Morgan sees increase in chances of no-deal Brexit to 25%

JP Morgan, Brexit, Brexit no-deal

JP Morgan in its research note said that the base case scenario for the increase is that Boris Johnson will become the next UK PM

In American investment bank JP Morgan’s analysis, chances of a Brexit no-deal has increased from 15 percent to 25 percent. That said, it has also slashed the exit probability to 15 percent from 35 percent based on Theresa May’s Withdrawal Agreement.

The company’s research note to clients was titled Brexit: Time to be afraid, as ‘no deal’ probability rises. The bank in its note predicted that Boris Johnson will win the political race to become the next UK Prime Minister. This according to Head of UK Economics Malcom Barr is the base case scenario for JP Morgan’s probability analysis on Britain leaving the European Union.

“Boris Johnson becomes PM in early September on a ‘no deal if we have to’ platform,” Head of UK Economics Malcom Barr said. “The EU refuses his central objective of removing the backstop from the Withdrawal Agreement.”

The current deadline for Britain to exit the EU is October 31. The prolonging uncertainty has shocked its business and financial landscape to a great extent.

JP Morgan in its research note said, “The Commons begins the process of legislating to force Johnson to seek an Article 50 extension, and Johnson calls a general election seeking a mandate for his approach.”

“The UK and EU agree to extend Article 50 to end-December to allow time for the general election to take place and for discussions to follow it,” it added.

JP Morgan believes that the EU will reject Johnson’s proposal to remove the backstop from any Brexit withdrawal deal. In essence, the backstop is a legally binding insurance policy to make there is no ‘hard border’ with England after its independence from the EU.

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