LONDON — There remains a small chance that Brexit will be reversed and Britain won’t actually leave the European Union, according to research by analysts from Morgan Stanley.
The American bank’s UK economics team published a huge strategy note discussing the huge variety of potential Brexit outcomes this week, as well as their economic and political consequences.
Within the note, the team — led by Jacob Nell and Melanie Baker — argued that there is a much as a 10% chance that Brexit may not end up happening, despite the fact Britain and the EU are already six months into negotiations.
Describing any chance of a Brexit reversal as “modest,” Morgan Stanley lays out the scenario it envisions could lead to Britain staying in the 28-nation bloc.
“A Brexit reversal scenario would require three changes, in our view, the combination of which has a low probability,” the team writes.
Those three scenarios are as follows:
- “Another election before the UK leaves the single market, which we see as a two-thirds probability.” Morgan Stanley’s team said, in the same note that it expects Theresa May’s government to collapse in 2018 as splits in the cabinet over Brexit become untenable.
- Secondly, Jeremy Corbyn’s Labour Party would need to win that election, either with a majority in the House of Commons, or through some sort of minority/coalition government.
- Third, Morgan Stanley says, Labour would need to change one of its key Brexit policies. “A change in Labour policy to supporting free movement of labour, perhaps in a modified form, which we see as no more than a one-third probability.”
To be clear, the 10% probability of a Brexit pull-back means it is still very, very likely that Britain leaves the EU in some form — whether that is as a member of the EEA, outside the single market, or in any one of myriad possibilities.
“If you take these probabilities seriously — and they are only meant to be indicative — this would imply that the probability of an eventual Brexit reversal continues to be modest, in the 10% range,” the note says.