JPMorgan sees Boris Johnson as next PM

U.S. investment bank JPMorgan raised its probability of a no-deal Brexit to 25 from 15%, saying its base case is that Boris Johnson becomes prime minister, followed by a general election and then another delay to Britain’s exit to the end of the year.

JPMorgan raised the probability of an Article 50 extension to 60 versus 50% before and cut the probability of exit on the terms of Prime Minister Theresa May’s Withdrawal Agreement to 15 from 35%.

In a research note to clients titled “Brexit: Time to be afraid, as ‘no deal’ probability rises”, JPMorgan’s Malcolm Barr said the base case was that Johnson became prime minister in early September.

“Boris Johnson becomes PM in early September on a ‘no deal if we have to’ platform,” Barr said. “The EU refuses his central objective of removing the backstop from the Withdrawal Agreement.”

“The Commons begins the process of legislating to force Johnson to seek an Article 50 extension, and Johnson calls a general election seeking a mandate for his approach,” the note added.

“The UK and EU agree to extend Article 50 to end-December to allow time for the general election to take place and for discussions to follow it.”

Nearly three years after the United Kingdom voted 52 to 48% in a referendum to leave the EU, it remains unclear how, when or even if it will leave the European club it joined in 1973. The current deadline to leave is Oct. 31.

Britain’s labyrinthine crisis over Brexit has stunned allies and foes alike, and with deadlock in London, the world’s fifth largest economy faces an array of options including an exit with a deal to smooth the transition, a no-deal exit, an election or a second referendum.