No-deal Brexit odds - what are the chances of the UK leaving the EU without a trade deal?

The chances of the UK and EU securing a trade deal before the end of the year are falling, according to bookmakers, despite a year of rising optimism that talks would succeed. After a weekend of negotiations, Ursula von der Leyen, the EU chief, announced on December 13, that negotiations with the Prime Minister will continue, despite the deadline which was set for this Sunday. Mrs Leyen stressed that both she and Mr Johnson felt it would be responsible at this point in time to "go the extra mile" despite the “exhaustion” and missed deadlines. The current odds being offered on no deal being reached before December 31 are 1.25/1, according to Oddschecker - an implied probability of 44 per cent. It comes amid news that the Royal Navy is preparing to patrol Britain's fishing waters in the event of a no-deal Brexit. Furthermore, sources from the EU have suggested they will impose “lightning tariffs” on Great Britain if the UK breaches the terms of a deal. This is, supposedly, one of the most significant obstacles in preventing a trade agreement.  Boris Johnson’s attempts to negotiate directly with Angela Merkel and Emmanuel Macron have been rebuffed three times in a week, prompting him to warn a no-deal outcome to Brexit talks is now “very, very likely”. The Prime Minister has warned there is now a "strong possibility" of no deal. Despite this, however, talks from December 13 hinted towards a newfound optimism compared to what we have seen previously.  No deal would mean Britain effectively trading with the EU on World Trade Organisation terms, with tariffs and regulatory checks on goods crossing the borders. On Dec 10, Mr Johnson told journalists the time had come to “get on and make those preparations” to trade on Australia-style terms with Europe from Jan 1.  The Prime Minister said the EU wants to treat the UK as a “twin” that must copy whatever it does in future, which is “clearly not the sensible way to proceed”. The Telegraph disclosed on December 13 that cabinet ministers are drawing up a multibillion-pound bail-out package to bolster industries hardest hit by a no-deal Brexit. How have the odds changed? Throughout 2020 bookmakers have offered shorter odds on the probability of a trade deal as the final deadline looms.  In the months after Brexit Day on Jan 31, when the UK officially and legally left the European Union, bookmakers' odds heavily favoured no deal. But since then, the implied probability of no deal being reached has fallen considerably. Implied probability is the likelihood of a particular outcome based on the betting odds on offer at the time. For example, odds of 2/1 would typically yield the desired outcome once in every three scenarios, so the implied probability would be 33.3 per cent. Over the course of the year the implied probability of a no-deal exit has fallen from a high of 94 per cent in early April to a low of 17.6 per cent at the start of December, suggesting bolstered confidence among bookies of a deal being reached. After the sixth round of negotiations, which concluded on July 24, the implied probability of a no-deal Brexit fell dramatically. They were the first round of talks since the UK had allowed the deadline to apply for an extension to the transition period to lapse, effectively locking in place the deadline which now looms - Dec 31. At the time EU negotiator Michel Barnier said their "resolve remains unchanged" despite talks remaining "far away" on several key issues including the "level playing field" and fishing quotas. Both remain sticking points today. The implied probability of a no deal Brexit spiked once more as the Internal Market Bill was first introduced in Parliament - a frosty period in UK/EU relations. At the same time - in early September, Boris Johnson issued an ultimatum to negotiators, fixing a deal deadline of Oct 15, or the UK would walk away. After that date had passed and negotiations continued, the implied probability of a deal continued to improve based on bookmakers' odds - likely a reflection of the UK backing down from the game of brinkmanship and continuing talks. As trade talks were extended today, December 13, odds are likely to swing further towards no deal.

No-deal Brexit odds - what are the chances of the UK leaving the EU without a trade deal?

The chances of the UK and EU securing a trade deal before the end of the year are falling, according to bookmakers, despite a year of rising optimism that talks would succeed.

After a weekend of negotiations, Ursula von der Leyen, the EU chief, announced on December 13, that negotiations with the Prime Minister will continue, despite the deadline which was set for this Sunday.

Mrs Leyen stressed that both she and Mr Johnson felt it would be responsible at this point in time to "go the extra mile" despite the “exhaustion” and missed deadlines.

The current odds being offered on no deal being reached before December 31 are 1.25/1, according to Oddschecker - an implied probability of 44 per cent.

It comes amid news that the Royal Navy is preparing to patrol Britain's fishing waters in the event of a no-deal Brexit.

Furthermore, sources from the EU have suggested they will impose “lightning tariffs” on Great Britain if the UK breaches the terms of a deal. This is, supposedly, one of the most significant obstacles in preventing a trade agreement. 

Boris Johnson’s attempts to negotiate directly with Angela Merkel and Emmanuel Macron have been rebuffed three times in a week, prompting him to warn a no-deal outcome to Brexit talks is now “very, very likely”.

The Prime Minister has warned there is now a "strong possibility" of no deal.

Despite this, however, talks from December 13 hinted towards a newfound optimism compared to what we have seen previously. 

No deal would mean Britain effectively trading with the EU on World Trade Organisation terms, with tariffs and regulatory checks on goods crossing the borders.

On Dec 10, Mr Johnson told journalists the time had come to “get on and make those preparations” to trade on Australia-style terms with Europe from Jan 1. 

The Prime Minister said the EU wants to treat the UK as a “twin” that must copy whatever it does in future, which is “clearly not the sensible way to proceed”.

The Telegraph disclosed on December 13 that cabinet ministers are drawing up a multibillion-pound bail-out package to bolster industries hardest hit by a no-deal Brexit.

How have the odds changed?

Throughout 2020 bookmakers have offered shorter odds on the probability of a trade deal as the final deadline looms. 

In the months after Brexit Day on Jan 31, when the UK officially and legally left the European Union, bookmakers' odds heavily favoured no deal.

But since then, the implied probability of no deal being reached has fallen considerably.

Implied probability is the likelihood of a particular outcome based on the betting odds on offer at the time. For example, odds of 2/1 would typically yield the desired outcome once in every three scenarios, so the implied probability would be 33.3 per cent.

Over the course of the year the implied probability of a no-deal exit has fallen from a high of 94 per cent in early April to a low of 17.6 per cent at the start of December, suggesting bolstered confidence among bookies of a deal being reached.

After the sixth round of negotiations, which concluded on July 24, the implied probability of a no-deal Brexit fell dramatically.

They were the first round of talks since the UK had allowed the deadline to apply for an extension to the transition period to lapse, effectively locking in place the deadline which now looms - Dec 31.

At the time EU negotiator Michel Barnier said their "resolve remains unchanged" despite talks remaining "far away" on several key issues including the "level playing field" and fishing quotas.

Both remain sticking points today.

The implied probability of a no deal Brexit spiked once more as the Internal Market Bill was first introduced in Parliament - a frosty period in UK/EU relations.

At the same time - in early September, Boris Johnson issued an ultimatum to negotiators, fixing a deal deadline of Oct 15, or the UK would walk away.

After that date had passed and negotiations continued, the implied probability of a deal continued to improve based on bookmakers' odds - likely a reflection of the UK backing down from the game of brinkmanship and continuing talks.

As trade talks were extended today, December 13, odds are likely to swing further towards no deal.