Bookies still pretty sure Brexit isn’t going to happen

While polls show the U.K.’s Brexit vote poised on a knife’s edge, bookies remain fairly confident the nation will stay in the European Union.

Most of the biggest betting firms and exchanges in the United Kingdom, Ireland and beyond place a 60 percent or better chance on David Cameron averting a so-called Brexit. That’s even after five polls published this week showed the “Leave” side ahead, with the latest survey giving it as much as a 7 percentage-point lead over “Remain.”

“Pollsters ask people what they feel on a particular day; we are predicting what they will actually do on June 23,” said Jamie McKittrick, head of sports trading at Ladbrokes. “Historically, we have seen a late swing to the status quo, especially among the undecideds.”

Analysts at firms like Danske Bank and Investec now routinely include gambling odds in client notes, with betting markets viewed as offering clues to the direction of political events. In March, for example, Paddy Power Betfair, Ireland’s largest bookmaker, paid out 120,000 euros ($135,000) on Donald Trump winning the U.S. Republican presidential nomination, months before he won enough delegates to become the presumptive nominee.

“Betting doesn’t tell what the future will be,” said professor Leighton Vaughan Williams, director of the betting research unit at England’s Nottingham Business School. “It tells us what the probable future will be.”

As recently as last month, oddsmakers were placing a 20 percent chance on the possibility of the U.K. leaving the EU. While bookmakers like Ladbrokes this week slashed the odds on a Brexit, they still make the U.K. staying in the EU the most likely outcome. That’s a pattern apparent across most betting firms and exchanges.

“The EU referendum market has exploded into life in the past week with an average of 1 million pounds traded every day, ” said Naomi Totten of Betfair, which also places a 60 percent probability on the U.K. opting to stay inside the EU. “Brexit has been backed heavily in the past 24 hours, although Remain is still clinging to favoritism.”

In a Bank of America Merrill Lynch fund managers’ survey, two-thirds of the respondents said they think Brexit is unlikely.

The key reason for bookies’ confidence is a tendency for undecided voters to swing back to the incumbent as voting day approaches. In the final weeks of the 1995 campaign on Quebec’s independence, polls showed separatists gaining the lead, before a last-minute shift saw them defeated. Similarly, late polls in Scotland in 2014 put independence campaigners ahead, before voters ultimately opted to remain with the U.K.

“This time, we expect a significant majority of the 12 percent to 15 percent who still haven’t made their minds up to break for the Remain side,” said McKittrick.

Most high rollers appear to agree. Some 73 percent of all the money wagered on the contest at Ladbrokes has gone to the “Remain side,” even though 67 percent of all bets have been for “Leave.”

Bookies aren’t always right. Last year, Paddy Power said it was left “red-faced” after paying out early to gamblers who incorrectly bet that Greek voters would back an austerity referendum. In this vote, bookmakers are scrambling not to get caught out. William Hill Plc said on Tuesday that ‘Brexit’ could take over as favorite by the weekend, should the campaign maintain its recent momentum.

“The odds tell us there’s about a 60 percent or so of ‘Remain’ winning, which translates, allowing for favorite-longshot bias, to about a 2 in 3 chance,” said Vaughan Williams. “If there was 1 in 3 chance of getting knocked down while crossing the road or your airplane falling out of the air, you’d be nervous.”