Wall Street divided on Brexit: Goldman sees a deal, JPMorgan sees a delay

LONDON: As the United Kingdom’s Brexit crisis deepens, two of the titans of Wall Street have starkly different views of the ultimate outcome: Goldman Sachs sees a 50 percent probability of a ratified deal while JPMorgan sees a delay.

Unless Prime Minister Theresa May can get a Brexit deal approved by the British parliament, then she will have to decide whether to delay Brexit or thrust the world’s fifth largest economy into chaos by leaving without a deal.

Goldman Sachs said it sees a 50 percent probability of May getting a Brexit divorce deal ratified, adding that lawmakers would ultimately block a no-deal exit if needed.

Goldman said it saw the probability of a no-deal exit at 15 percent and the probability of no Brexit at around 35 percent.

“There does exist a majority in the House of Commons willing to avoid a ‘no deal’ Brexit (if called upon to do so), but there does not yet exist a majority in the House of Commons willing to support a second referendum (at least at this stage),” Goldman said in a note to clients on Friday.

“The prime minister will repeatedly try to defer the definitive parliamentary vote on her negotiated Brexit deal, and the intensification of tail risks will continue to play a role in incentivizing the eventual ratification of that deal.”

May suffered a defeat on her Brexit strategy on Thursday that undermined her pledge to EU leaders to get her divorce deal approved if they grant her concessions.

She has promised that if parliament has not approved a deal by Feb. 26, she will make a statement updating lawmakers on her progress on that day and lawmakers will have an opportunity on Feb. 27 to debate and vote on the way forward.

JPMorgan said that it thought May would now seek an extension to the March 29 deadline.