LONDON (Reuters) - Berenberg economists on Wednesday increased their estimate of the likelihood Britain stays in the European Union’s customs union after Prime Minister Theresa May said she would work with opposition Labour leader Jeremy Corbyn to break the deadlock on Brexit.
“May’s speech signals a pivot away from her own idea of a free trade agreement with the EU towards a softer Brexit that could win a majority in parliament,” wrote Berenberg’s Kallum Pickering and Holger Schmieding.
They upped the probability of the UK staying in the customs union to 45 percent from 35 percent, and cut the likelihood of the current Withdrawal Agreement being passed to 5 percent from 10 percent.
Berenberg said the move to compromise with the opposition makes an overturning of Brexit less likely, and cut their probability of a “no Brexit” outcome to 20 percent from 25 percent.
A general election could still be on the cards, though.
“Corbyn could refuse to offer a compromise acceptable to moderate Conservatives and/or insist on a confirmatory referendum in the hope of fracturing the Conservative party and trigger a snap election,” the economists wrote.
They raised their estimate of the likelihood of a Corbyn-led government to 20 percent from 15 percent.
Reporting by Helen Reid, editing by Danilo Masoni