Business Insider: Morgan Stanley says there is a 10% chance that Brexit won't actually happen

04 September 2017

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:

1. "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.
2. 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. 
3. 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.

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