LONDON: The risk Britain will crash out of the EU without an agreement is low but rising, according to banks and asset managers who also see a growing likelihood of Brexit being delayed.

With less than two months until Britain is due by law to leave the EU, lawmakers voted on Jan 29 to demand Prime Minister Theresa May seek changes to Britain’s exit treaty, which the EU says cannot be renegotiated.

They also voted to express opposition to a no-deal exit from the EU but rejected a proposal that would delay Brexit if necessary to avert crashing out without a deal.

Some analysts saw these events as raising risks of a no-deal Brexit, though they still assigned a low probability to this outcome. However, belief has grown that the government will have to extend the March 29 deadline for its EU exit.

Sterling was trading around $1.30 on Tuesday, up 1.8 per cent this year but off 2-1/2-month highs hit in the run-up to the Jan 29 vote.

For an interactive chart on no-deal probabilities assigned by a group of banks: Below are the views from a selection of investment banks and asset managers:

AMUNDI ASSET MANAGEMENT: Views no-deal probability at roughly 20pc but estimates a 50pc chance an agreement is ratified by March 29. It also sees a roughly 30pc probability of Brexit being postponed by several months, citing the likelihood of a new referendum or new elections or even a withdrawal of Article 50 by Britain.

COLOMBIA THREADNEEDLE INVESTMENTS: Reckons there is a 60pc chance of an orderly exit, with the remaining 40pc split between an Article 50 extension and a no-deal scenario.

GOLDMAN SACHS: Raised its estimated probability of no-deal Brexit to 15pc from 10pc after the parliament vote. The bank also cut the probability of Brexit not happening at all to 35pc from 40pc while leaving chances of a delayed Brexit at 50pc.

DEUTSCHE BANK: Raised its estimate of the probability of a no-deal Brexit to 15pc from 5pc and recommended taking profit on a long sterling position.

However, the bank also raised to 50pc its prediction of the chance of a last-minute ratification of May’s deal, versus its prior view of 30pc.

It cut the probability of a second referendum to 5pc from 15pc.

BNP PARIBAS: Kept unchanged its view of a 20pc chance of a no-deal Brexit and a 35pc chance of a second Brexit referendum. Advised staying long sterling, noting that parliament had merely “kicked the can down the road”.

It sees a delay to the March 29 deadline as “inevitable”.

STANDARD CHARTERED: Main­tains its view of a 20pc chance of no-deal Brexit but sees rising chances that Brexit will be delayed.

BERENBERG: Reckons risk of a hard Brexit “by accident” has risen to 30pc from 20pc. The bank also now sees a 20pc chance of no Brexit, down from around 25pc earlier. It said that in any outcome involving a deal, an extension of the deadline could be necessary.

ING BANK: Sees the probability at 20pc, same as previously, noting lawmakers’ clear appetite for a deal.

MUFG: Assigns 10-15pc chance of a no-deal Brexit and has not changed that estimate. Its view is that the parliament vote was a setback rather than the endgame, with lawmakers likely to agree a deal. The bank reckons however that the deadline for leaving will have to be extended.

NORDEAP: Says that following the parliament vote, likelihood of no-deal Brexit would be 25-30pc compared to 20pc earlier. Sees a delay to the deadline as “a certainty”.

OANDA: Sees no-deal risk at 10pc at most and has not changed that probability, predicting lawmakers will opt to approve a deal rather than risk the damage caused by a disorderly Brexit.

Published in Dawn, February 6th, 2019