Brexit doesn't mean Brexit to everyone

[LONDON] Theresa May, UK Home Secretary and candidate for prime minister, says "Brexit means Brexit". Perhaps not unsurprisingly given the current tone of UK politics, not everyone agrees.

Credit Suisse Group AG analysts see the probability of Britain actually leaving the European Union as "well below" 50 per cent. William Porter and Chiraag Somaia say their conclusions are based on game theory and are not the official view of the Swiss bank.

One of their main arguments is that whoever wins the contest to replace David Cameron as prime minister will struggle to form a government that is able to trigger Article 50 of the Lisbon Treaty, which would mark the formal start of two years of exit negotiations.

Where does the government come from that is committed to Article 50? There would be a clear chance, notwithstanding Labour's issues, and remembering the 50 SNP members who may be taken a given "Remain" bloc vote, that such a (Conservative) government could not be formed. And if it were, could it bind its members?

The internal incentive structure in the UK seems clear; the incoming Conservative leader unless UTTERLY confident that she or he can overcome an obvious incentive structure, would be taking an extreme risk in pushing for Article 50.

Tyler Cowen, a conservative economist at George Mason University, wrote on Tuesday that with David Cameron, Boris Johnson, and Nigel Farage all stepping away from party leadership positions "few leading politicians are keen to 'own' Brexit and its consequences." And the desire to back away from it will only grow stronger the longer there is a delay in triggering Article 50 and the more the economy weakens in the interim.

Bookmaker Skybet is offering odds of 4/1, or a 20 per cent chance, that Article 50 will be triggered between January and March next year.

However, others see Brexit as virtually inevitable. Societe Generale SA's UK economist Brian Hilliard puts a near 90 per cent probability on a Brexit happening. This is why: The UK referendum outcome was advisory rather than creating a legal requirement for the government to trigger Article 50. However, any UK government that does not respect that vote will need to provide a very strong justification for its decision which would then need to be put again to the people, ie in either a snap general election or a second referendum. That would obviously especially be the case if such a decision were to be taken by a government led by a Leave campaigner.

Here's how SocGen sees Brexit playing out: That the process of a British exit from the European Union is proving as divisive as the referendum outcome itself is not surprising given the tumultuous events of the past fortnight. However, a clearer path may be emerging as the Conservative Party takes the next step toward selecting the nation's new prime minister today.

BLOOMBERG