Ah, Brexit, remember that? It was over in a flash, wasn’t it? One minute there is a clean, fair and honestly fought referendum campaign and the next minute we’re out of the EU, back in control of our country, the NHS over-flowing with funds and Nigel Farage remembered as a great politician and, more than that, a true gentleman.
In truth, perhaps it wasn’t quite like that. No matter whether you sided with Nige and Bozza or you were a staunch Remainer, there can be no doubting that Brexit dragged on… and on and on, like Ariston, or a Duracell bunny, or something else that just seemed never ending. In fact, some might say that Brexit was like the Never Ending Story, except far worse and much more boring. And, different, in that it did finally end.
Oh, yes, the UK had many so-called independence days but in truth the 1st January 2021 was when we really did leave the EU, something that, let’s face it, lots of people on both sides of the argument were beginning to believe might never happen. Whilst there is still a lot of work to be done and lots of transitioning still to undertake, Brexit, in terms of the UK actually leaving the EU, finally, is “done”.
Is Brexit Going to Be Reversed?
Well, no sooner is Brexit done with and what’s this coming over the hill? Only a Paddy Power special on the UK re-joining the European Union?! Fear not, Brexiters – and indeed anyone else who just doesn’t fancy another five years of tedious and often-spiteful debate – Paddy are rather known for their – shall we say – provocative specials. Paddy Power and indeed certain other betting sites may well be offering odds on Brexit being reversed but that doesn’t mean it is something that is likely to happen any time soon.
First of all, we should consider the market that is currently available: “UK to rejoin the EU as full member before 2026?” Obviously, we know that any political change on this scale takes time but even allowing for that, the fact that this market is giving five years for “UnBrexit” as we are going to label it, suggests it is certainly not something we are going to see happening quickly.
Then, of course, we must look at the odds. The table below shows the odds for each outcome, as well as the probability of the event happening the odds imply.
|UK rejoins EU||5/1||16.7%|
|UK does not rejoin||1/10||91%|
Those unfamiliar with how odds work and the way bookies factor their profit into them may be confused by two things. Firstly, those with a sound knowledge of politics may question whether an almost 17% chance of UnBrexit is not rather overstating things. Secondly, one may well ask why the implied probabilities add up to well over 100%.
In a “fair” market, with odds that accurately reflected the chances of an event happening the implied probabilities would indeed equal 100%. So, a coin toss where heads was evens and so was tails would give true odds and an implied probability of each event happening of 50%, for a total of 100%.
Of course, bookies, sadly, are not in business to give punters odds that are fair. After all, they have staff to pay, shiny shops to build, free bets and promotions to fund, Ray Winstone’s mortgage to think about and shareholders who demand growing profits and perhaps even a dividend or two each year.
As such their odds are lower than they “should” be, essentially factoring in a profit margin for themselves. Lower odds imply bigger probability of the event occurring than the reality and so the total implied probability is over 100%. This is called the overround and you should note that anytime you find a market where the implied probabilities are lower than 100%, there is actually a chance to back all outcomes and lock in a guaranteed profit. This situation does arise sometimes and arbitrage betting, or arbing, is the process that allows the punter to take advantage of it.
Is There Much Chance of It Actually Happening?
Okay, gambling theory explained, let us now return to the chances of Brexit being overturned. In the table above, we can see that the odds given are 1/10 for the UK to remain outside the EU and 5/1 for us to return as full members before 2026. Now we know about the overround, we can safely say that both of those odds are probably bad value. That means that in order to reflect the genuine probabilities of either outcome, both prices should be higher.
By that we mean that whilst the odds might suggest UnBrexit has almost a 17% chance of happening within the prescribed timeframe, most people would suggest it is actually far lower. A price of 5/1 would actually represent the fair odds for any specific number being rolled with a standard, unbiased dice. Few serious political pundits would suggest that the UK returning to the EU as a full member before 2026 has anything like such a high chance of occurring.
Of course, that is not to say it cannot happen. When Mon Mome won the 2009 Grand National at odds of 100/1, almost every racing expert would have said it had no chance. And UnBrexit is far from a 100/1 shot.
In football terms, 5/1 is the sort of price you might get on, for example, Southampton beating Liverpool. And, guess what? On the 4th January 2021 they did! Most firms priced the Saints at around 5/1, with typical odds between 9/2 and 11/2.
Indeed, in a season where shocks have been plentiful, we have seen many teams in the Premier League and other divisions around Europe win at odds of 5/1 or even longer. Indeed, Crawley Town were as big as 16/1 on the betting exchanges to beat Leeds United in the 3rd round of the 2021 FA Cup. They didn’t just beat them, they hammered them 3-0!
Much as people say a team, individual or outcome has “no chance”, that is simply not true. If a horse is in a race, if a football team is on the pitch, if a golfer is in the tournament, they have a chance. When we bet, we are essentially making a prediction about the future. Nobody can know, with 100% certainty, what will happen in the future and this is why value is key to betting. That is a separate discussion for another day but the simple point is this: no matter what politicians, pundits and experts say, there is a chance that UnBrexit could happen.
What Are Fair Odds for Brexit Reversal?
We are not political sages, nor Brussels insiders and so we cannot say with much confidence what the “true” odds for the UK re-joining the EU would be. It is for an individual to assess the odds and probabilities for any bet and compare the two. If you believe that the UK is likely to renegotiate entry back into the EU and officials can complete that process fully before 2026 then 5/1 would be a hugely profitable price to snap up.
The point with value is that you don’t even need to think that it is “likely” to happen. If you think such a political U-turn has a 40% chance of happening, that means you think it has a 60% chance of not happening. In simple terms, if pushed for an answer you would say the UK will not re-join the EU. None the less, if you can get odds of 5/1 on something that you think will occur four times in every 10 then you should absolutely snap that price up. At those odds it offers huge value.
Indeed, using the Kelly Criterion, a formula that allows you to determine your stake based on the perceived value of the bet and the likelihood of it winning, you should stake a whopping 28% of your betting balance on such a wager. For reference, if you believed the likelihood of UnBrexit was 20%, still well over the 16.7% implied by the odds, you would be advised to bet just 4% of your stake.
Of course, you may take the opposite view and believe that there is virtually no chance of us re-joining the EU within the specified timeframe. Given the events of 2020, and indeed 2016 and, in fact, life in general, it would be unwise to be too blasé about deeming an event impossible, or being overly certain about very much at all. That said, whilst you may accept that anything can happen, and there are certainly many strange turns of event that could lead to the UK’s re-admittance into the EU, if you believe there is a 99.9% chance of Brexit meaning Brexit (into 2026 and beyond, at least), then you might choose to cash in.
Punching these numbers into our Kelly calculator gives us a stake of almost 99% of our bank (the reason this is so high is partly because the bet is deemed to have a 99.9% chance of winning, so is almost guaranteed to come in). If we drop that probability down to 96% but based on the same 1/10 odds (implied probability of 91%) then it is still a great value bet but the recommended stake is much lower at 56%.
All that said, whilst we cannot claim to be experts, our gut feeling is that a reversal of Brexit before 2026 is highly unlikely. Moreover, by highly unlikely, we mean we would rather back “No” at 1/10 than “Yes” at 5/1. Based on our rudimentary guestimate we would say the true probabilities are more like 98% and 2%, so on the face of it 1/10 may well be a good value bet.
Whether it pleases you or not, if you have accepted Brexit and are hugely confident it is here to stay, it is probably still unwise to back against the UK re-joining the European Union. You may be convinced that Brexit will not be reversed but you should remember that this is a market that will tie up your cash for a long time, especially if you are betting against the UK re-joining.
In such a scenario, your cash would be tied up until 2026. Odds of 1/10 will deliver a profit of 10% but is such a return worth it over almost five years? It might well beat the paltry rate you could get in a savings account but of course betting carries far greater risk. No matter how certain you are, the bet could still lose. What’s more, there is further risk, albeit very small (assuming you use a trusted bookie), due to the tiny chance your bookmaker could go bust in that five year period.
Last of all, even if the bet wins and the betting site pays up promptly, your 10% total return will barely beat inflation. As such, no matter how convinced you are of the truth in Theresa May’s famous dictum “Brexit means Brexit”, this is not a bet we would advise taking.
Timeline for Re-Joining the EU
There are many things that would need to happen before the UK could re-join the EU. The first real step would be a new referendum as it is almost impossible to think any party would have the audacity to attempt to re-join without putting it to the people. We know from the first referendum and from the position with regards Scottish independence that such things do not happen quickly.
With Brexit seemingly resolved there are few active betting markets relevant to the issue, aside from the one we are chiefly discussing. One other of note is which country will be the next to hold an In/Out referendum. Following the narrow win for Leave back in June 2016, when 51.9% of the votes were in favour, there was talk of other nations queuing up to leave. Perhaps seeing what a mess we have made of matters, and certainly now with bigger virus-shaped fish to fry, it seems unlikely any other nation will hold a referendum in 2021.
In the market to which we have alluded, “No Referendum Before 2022” is the huge odds-on favourite at around 1/10. Italy (28/1) is the only nation priced at odds of shorter than 40/1 and the UK is priced at whopping odds of 159/1. Of course, we do not need to be the next nation to hold such a referendum in order to re-join at some stage but these prices certainly indicate there is little chance of such a vote taking place in 2021.
In truth, there is little chance of such a vote taking place in 2022 either. Before we got close to a referendum there would need to be a big change in public opinion and quite probably government. Whilst the demographics of the country have shifted a little since 2016, it is unlikely either of those things are going to happen quickly. What’s more, even if the majority of the nation did really believe re-admittance to the EU would be a good thing, is there really the stomach for another protracted, bitterly fought referendum?
None the less, let us assume that such a referendum was held at some stage in the coming years and was won by the pro-EU side. Would the EU even have the UK back? Much as many politicians and bureaucrats around the continent would probably be tempted to go with their heart and tell us where to go, in reality, there is every chance that negotiations around re-joining would be rather smoother than they were for leaving.
Compared to many of the 27 member states, the UK is a large, prosperous economy and a secure, stable democracy (no laughing at the back). Trying to gauge how such negotiations would go is hypothetical in the extreme though. Just as we were the first to break away from the EU, we would, of course, be the first to re-join. As such there is no protocol for how things would work or how long such a process might take.
None the less, these are the steps that would be needed before the UK could once again become a full member of the EU. Will it happen before 2026? Almost certainly not… but never say never!