Bloomberg | 14 June 2016
Four polls put the “Leave” campaign ahead of “Remain” as The Sun newspaper came out in favor of Britain quitting the European Union, sending stocks and the pound down.
Sterling approached a two-month low against the dollar and investors rushed to havens Tuesday after a series of new polls the previous evening put “Leave” ahead with just nine days of campaigning left. The final blow came when The Sun, Britain’s biggest-selling newspaper, backed a so-called Brexit on its front page.
Prime Minister David Cameron’s strategy to keep the U.K. in the 28-nation EU is under increasing pressure in the countdown to the June 23 referendum, as the “Leave” campaign’s focus on reducing immigration appears to resonate more with voters than the government’s multiple warnings of economic recession outside the bloc.
John Curtice, professor of politics at Strathclyde University in Glasgow and one of Britain’s leading experts on opinion polling and elections, put the likelihood of a Brexit at about 33 percent, up from 25 percent three weeks ago.
“This is an issue on which the British public have always demonstrated the potential to vote to leave,” Curtice said in a Bloomberg Television interview Tuesday. Still, Curtice said, the movement in the polls is not large, and often in referendums voters move back to the status quo in the final days of the campaign. “Clearly one of the crucial things between now and June 23 is whether or not the polls do move back towards ‘Remain’ as voters look at the risks of leaving.”
The pound dropped 0.7 percent to $1.4169 as of 11:45 a.m. in London after falling as low as $1.4112. Implied volatility for one-month options on the currency climbed to 29.125 percent, more than three times the level at the end of last year. The Stoxx Europe 600 Index was down 1.2 percent.
The NumberCruncherPolitics estimate of the probability of a Brexit surged to 32.6 percent from 23.7 percent. Its creator, Matt Singh, wrote that “we have ample evidence that the move is real.” Oddschecker’s survey of bookmakers’ implied probabilities rose to 42.5 percent on Tuesday morning from 33.5 percent a day earlier. “The momentum is such that it seems inevitable Brexit will be favorite by the weekend,” said William Hill Plc spokesman Graham Sharpe.
“Outside the EU we can become richer, safer and free at long last to forge our own destiny — as America, Canada, Australia, New Zealand and many other great democracies already do,” The Sun said. “If we stay, Britain will be engulfed in a few short years by this relentlessly expanding German-dominated federal state.”
Cameron has turned to the opposition Labour Party to help shore up the “Remain” vote. On Monday, his predecessor as prime minister, Gordon Brown, made an impassioned plea to Labour voters not to turn their backs on the EU. On Tuesday, the party’s current leader, Jeremy Corbyn, will have his turn.
“Today I am issuing a call to the whole Labour movement to persuade people to back ‘Remain’ to protect jobs and rights at work,” Corbyn will say at an event in London, according to his office. “We have just nine days to go to convince Labour supporters to vote ‘Remain.”
The Vote Leave campaign aimed for economic reassurance, promising that spending on all the things the EU currently funds such as university research and farm subsidies, as well as cutting tax on fuel and increasing spending on the National Health Service. “We’re going to take back control of the money we send to the EU,” Employment Minister Priti Patel told the BBC. “The government of the day will have options and choices as to how to spend that money.”
For the Labour “Remain” campaign, former Home Secretary Alan Johnson described this as “fantasy economics.” “That money won’t exist,” he told the BBC. “It only takes a 0.6 percent movement in our wealth to eradicate the 8 billion pounds ($11.3 billion) that is sent to Europe.”
Polling companies were burned by their failure to predict last year’s U.K. general election result, and a yearlong inquiry into their problems found the issues would be hard to fix. But even if the absolute numbers are wrong, the direction of travel is clear.
Dutch Prime Minister Mark Rutte, who said he exchanges regular text messages with Cameron, expressed the hope that the U.K. will stay in the bloc. “I have seen many predictions, I’ve seen polls that are all counting on the result that they will leave,” Rutte said in an interview in Amsterdam. “It makes absolutely no sense, and therefore I count on the collective wisdom of the Brits, and I’ve so far never been disappointed.”