June 21, 2016
Has Remain already won? Time to move on?
With three days to go until the Brexit referendum the polls are inconclusive. And yet, the markets have made up their mind that Remain will win - so much so that one gets the impression that the Brexit spook is over and it's time to move on. There is no need even to go to the polling stations. Place your bets now, go on holiday, and collect your winnings.
But, is this confidence justified? The FT's poll of polls has both sides at 44% each. We, too, are also a little more optimistic than a week ago but note that, if the poll of polls is correct, Brexit would still win because Leavers are more likely to turn up than Remainers. Remain would need a firmer lead - which they may have by now, but we don't have any hard evidence of that.
Here is the shift in Betfair trading, where the split between Remain and Leave is now 75/25. We find that highly implausible.
The decision by Sayeeda Warsi, a former chairwoman of the Conservative Party, to switch from Leave to Remain exposes the strains within the Leave campaign. They have probably pushed their anti-immigration rhetoric a few notches too far. Then again, we have not yet seen any convincing attempt by the Labour Party to mobilise its voters.
Maybe the market are beginning to realise that their optimism is a little overdone. As of this morning, the pound has weakened over the last 24 hours, though it is up on a week ago.
We always find it fascinating to see how people confound what they wish to be true with the hard evidence they have available. A poll by Politico among EU policymakers had only 14% expressing the view that Leave would win. This was done the day before the murder of Jo Cox MP, at a time when the Leave campaign was well ahead in the polls. What was perhaps the most interesting aspect of this particular poll - a result we do totally believe - is that virtually nobody believed that Brexit would strengthen the EU. There would not be any substantive push for integration by the other member states in that event.
Note also the Centre for European Reform's new paper on what the UK should do in case of a Remain victory. The authors hope for a renewed push, in areas such as foreign and security policy, energy policy, and neighbourhood policy among others, but they seem sceptical that this will happen. They acknowledge that it would be tempting to go back to crisis management as though nothing had happened. That, too, would be our expectation.