Goldman Sachs Says One-Year Brexit Extension Now More Likely

(Bloomberg) -- The defeat of Theresa May’s stripped-down divorce agreement with the European Union on Friday means a softer and longer Brexit process is now more likely, according to Goldman Sachs.

While there’s still time for London and Brussels to renegotiate the exit deal before the next “cliff-edge” on April 12, the timing of the ratification of a modified pact are now skewed toward an Article 50 extension of greater than one year, rather than a short delay of fewer than three months, the bank said in a note to clients.

“The longer that extension, in our view, the greater the likelihood of no Brexit at all,” analyst Adrian Paul said.

“We also see a greater likelihood that the 2016 Brexit decision is reversed -- either via a second referendum or via unilateral U.K. revocation of Article 50,” Paul added, saying the odds of “no Brexit” at all have risen to 40 percent from 35 percent.

The chances of a modified version of the withdrawal agreement eventually being approved in the House of Commons has fallen to 45 percent from 50 percent, but that remains the most probable of three outcomes considered, according to Goldman Sachs, which sees just a 15 percent chance of a no-deal Brexit.

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