Yahoo Finance Goldman still thinks UK more likely to scrap Brexit than leave without a deal
Goldman Sachs analysts still believe Britain is more likely to stay in the EU than leave without a deal, despite Boris Johnson’s victory in the Tory leadership race.
Analysts at the investment bank upped their prediction for a no-deal Brexit from 15% to 20% immediately after the former London mayor was announced the clear winner in the race to be the next UK prime minister.
But the analysts still said in a note that the chances of Britain remaining a member of the EU were far higher at 35%, only lowering it 5% as Johnson beat rival Jeremy Hunt in a landslide victory.
READ MORE: Business chief warns Johnson no-deal Brexit ‘opens trapdoor to quicksand’
A Goldman Sachs note on Tuesday also says a negotiated Brexit deal is the most likely option of all, putting the chances of a deal with Brussels at 45%.
Some investors are now hoping Johnson’s hardline rhetoric “may be toned down as he prepares to negotiate with Brussels,” according to Reuters.
Johnson used his winner’s speech in Westminster to restate his plan to take Britain out of the EU on 31 October, after pledging to leave by the deadline “come what may” on the campaign trail.
That hard deadline and his strident rhetoric appear to leave Johnson with little wiggle room to reach compromise with Brussels or his party, to call an election to break the parliamentary deadlock or to delay Brexit for further negotiations.
Many observers therefore believe a no-deal Brexit looks increasingly like the only option, with investors fleeing the pound in recent months as Johnson’s lead in the race and his hardline stance became clearer.
READ MORE: Investors brace for no-deal Brexit as Johnson declared victor
UBS also sounded a note of caution on the odds of a no-deal Brexit, with an analyst saying it believed the market was pricing the chances “too high” at 50%.
Dean Turner, UK economist at UBS Wealth Management, said: “The immediate concern for investors following the election of Boris Johnson as the new leader of the Conservative Party will be his plan for Brexit, given the commitment he made on the campaign trail to leave the EU on 31 October with or without a deal.
“We now estimate that the market is pricing in a 50 per cent chance of a no-deal Brexit at the end of October. We believe is too high. As a result, we overweight the pound versus the US dollar in our FX strategy.”
Leigh Himsworth, portfolio manager at Fidelity International, said: "I would argue that if we get a sensible (withdrawal) announcement and that removes the uncertainty, the UK-focused stocks are in position to bounce back from here.”
