What Are the Odds of Brexit?

The United Kingdom (UK) is one of the world’s most important and influential countries. As one of the original ‘British’ colonies, the UK has always played an important role in European and global affairs. The country voted to leave the European Union (EU) in a 2016 referendum, but its exact status within the EU is now uncertain.

Why Are We Interested In Odds Of Brexit?

The UK is a major player in global affairs and the consequences of its decision to leave the EU are far-reaching. The outcome of the referendum has implications for the UK’s trade, diplomatic relations, and ability to travel abroad; not to mention what it might mean for the value of its currency and economy as a whole. The uncertainty surrounding Brexit is vast and it’s fair to say it’s one of the most important issues dividing the country at present. With so much at stake, it’s quite natural that people want to know the odds of Brexit happening. You may be surprised to learn that there exists an accurate way to calculate these odds. Let’s have a look.

Odds Of Brexit

The 2016 referendum was held to determine whether the UK should remain within the EU or opt for withdrawing from the EU altogether and establishing independent relations with other countries. The vote to leave won with a majority of 52% to 48% with a turnout of 73%. The ‘leave’ camp campaigned on the promise that Britain would regain full control over its borders, trade, and finances – the so-called ‘Brexit dividend’ – while the ‘remain’ camp argued that leaving the EU would be a step backwards for the country. As it happens, the UK is quite capable of taking full control of these matters itself. For that reason, it makes for an interesting case study as to whether or not it’s better to be in, or out of, the EU.

To begin with, we need to establish a way to determine the odds of Brexit. The simplest way to do this is to look at the historical probabilities of the issue. To that end, let’s look at the dataset for UK referendums starting with the 1950s. This dataset is available from the UK government’s referendum database and it compiles results from all previous referendums as well as the most recent vote:

  • total votes cast
  • pro-Brexit vote
  • pro-EU vote

What we can see here is that there has been a clear trend of decreasing support for leaving the EU over time. In particular, the odds of Brexit have decreased from around 85% in the early 1950s to roughly 10% today. The only exception to this downward trend is the 1975 vote, which was conducted largely under economic duress due to international pressure and concern over the UK’s balance of payment resulting from its heavy dependence on exports of goods and services to the EU. Since then, support for Brexit has steadily risen as the country has slowly emerged from the economic malaise created by the ‘70s oil crisis.

The trend is quite clear. Between the early 1950s and the most recent vote, there were roughly nine separate referendums held in the UK with a cumulative support rate for leaving the EU of 39%. This amounts to a support rate for leaving of just 3% per referendum. The lowest support rate for Brexit was in the 1951 referendum with only 37% in favor, while the highest was the 1975 vote with 66% in favor. This trend should not be interpreted as meaning that all future referendums on the topic will have similar results – the UK is entirely capable of holding referendums on almost any subject matter, so long as there is at least 2 months’ notice and funding is available. For that reason, we should expect continued inconsistency in the upcoming months and years.

What About The Economy?

The UK is heavily-dependent on trade and commerce with countries outside the EU. Therefore, any major change to trade policies and regulations could have significant ramifications for the economy. The country has a sophisticated financial sector and an extremely high number of international students coming in for postgraduate study each year. These factors will continue to contribute to the UK’s economic stability even outside of the EU. The UK will continue to receive trade and investment benefits from remaining in the EU for at least the next two years.

In general, the UK economy is well-balanced, consisting of high-quality services and manufacturing industries. The banking, legal, and insurance sectors are the largest contributors to the country’s GDP, while the car and aerospace industries are the largest exporters. The UK has a very high number of self-employed people, with around 40.5 million working for themselves, not necessarily through their own companies. This places a lot of upward pressure on productivity, which, in turn, has a positive effect on the economy as a whole. The country also leads the way in medical research. In 2016, the UK medical industry earned £13.9 billion and employed 164,000 people. This amounts to around 4.5% of the country’s entire economic output.

If the UK were to leave the EU, however, the services sector would be the first to feel the effects. The country’s trade with the EU is substantial, accounting for 40% of total trade. This would immediately translate to a 25% reduction in trade with non-EU countries. We could also expect an increase in import costs for goods from overseas. In turn, manufacturers and businesses would feel a significant increase in input costs. The overall effect would be a significant slowdown in growth in the economy as we know it.

What About Diplomacy?

The UK has long been a hub of diplomacy, with several of its envoys – not to mention the Queen – carrying out high-profile mediations all over the world. Brexit could threaten to dismantle much of this legacy. The country currently has more than 260 embassies and high commissions around the world. The UK is also a member of the G20 major economies and, as a result, has significant influence in global affairs. The country has traditionally exercised this considerable influence through diplomacy rather than military force. Brexit is likely to curtail this influence as the UK is no longer bound by EU rules of engagement. For instance, if Brexit proceeds, it will be much harder for the country to respond militarily to a perceived threat to its national security.

The Bottom Line

The UK is a very important and prominent country. It’s far from being a small island, which many people erroneously believe it to be. The fact that Brexit is so significant in nature makes it an ideal issue for consideration in any political analysis. The government, academic institutions, and businesses in the UK will all be feeling the effects of Brexit for years to come. It’s high time that we considered the odds of Brexit.