Move over, NCAA. There’s a new March madness looming—the prospect that the UK will exit the European Union on 29 March without an agreement on the future UK-EU trading relationship.
A Wall Street Journal review of potential no-deal Brexit costs notes several eye-popping estimates, including:
- A £13 billion ($17 billion) annual increase in costs for UK firms to fulfill customs declarations duties when exporting to the EU (HM Revenue & Customs);
- A 5-8% long-term decrease in Britain’s GDP, coupled with a 1.5% decrease for EU member states (IMF); and
- Tens of millions of pounds in additional tariffs for individual companies such as Burberry Group PLC, the British luxury fashion maker.
High uncertainty about the no-deal Brexit scenario drives massive planning expenses for contingencies that may never arise. Even small reductions in uncertainty could yield large payoffs.
Enter the Superforecasters—the “forecasting foxes” (hat-tip to David Brooks) who have an enviable track record of early foresight. Superforecasters typically start with a base rate that reflects the frequency with which comparable events have occurred. The question naturally arises: What is a “comparable” event to a no-deal Brexit?
One Superforecaster tackled this tough question by generating an intriguing array of possibilities limited to “Europe, broadly defined, in the last 30 years”:
- “No exit”: separatist efforts in Catalonia’s recent attempt to leave Spain clearly failed, as did the 2014 Scottish independence referendum.
- From former Yugoslavia:
- Three “no-deal” departures (Bosnia, Croatia, and Kosovo);
- Three “arranged” departures (Slovenia, Macedonia, and Montenegro); and
- Two “remains” (Serbia and Vojvodina).
- From the former Soviet Union:
- Nine effectively “no-deal” departures that were messy, chaotic, and—to varying degrees—violent (Armenia, Azerbaijan, Estonia, Georgia, Latvia, Lithuania, Moldova, Tajikistan, and Ukraine);
- Five “arranged” departures (Belarus, Kazakhstan, Kyrgyzstan, Turkmenistan, Uzbekistan); and
- One “remain” (Russia).
Good Judgment’s professional Superforecasters routinely challenge one another to take an outside-view perspective on difficult-to-quantify uncertainties such as the prospect of a no-deal Brexit. Good Judgment’s new Future of Brexit package, about to be released, provides their latest probability forecasts on key questions such as “Before 1 January 2020, will the UK and the EU adopt an agreement on which customs territory Northern Ireland will be located in after the end of any Brexit transition period?” and includes highlights of Superforecaster commentary.
Contact us to learn more about the Future of Brexit package and other Superforecasts available by subscription or as custom forecasts on the questions that are most important to you.