The fallout from perhaps the most important political event for the UK in our lifetime has continued this week with Leave campaigner and former UKIP leader Nigel Farage stepping down.
With David Cameron also having resigned, and Boris Johnson announcing he won’t be standing in the race for the next Prime Minister, the political betting markets have been in overdrive. In the latest Bookies’ Corner SBC discussed the post Brexit aftermath with Unibet’s Ed Nicholson, Ladbrokes’ Head of Politics Matthew Shaddick, Jamie Loughead of Star Sports and Tonybet’s Warren Lush.
In the space of 48 hours the UK underwent a complete change in its political landscape, how has that affected the current political market set up for bookies?
Ed: Betting on the recent Euro Referendum vote was the first time in my memory that weight of money, and the ensuing odds on a political market were way out of kilter with the way a vote actually went. And then some.
As the polls closed around the country 8/1 was still available on us leaving the EU, and throughout the night the odds for Remain were getting shorter and shorter. Ten minutes after polling booths were closed Remain was 1/20. Even Nigel Farage had appeared on television to all but concede defeat. It wasn’t until around 2am that Leave went odds on in the world of live internet betting.
So how did we, the bookmakers, get it so wrong? And what should we both, the bookies and punters, learn from this amazing moment in our history?
Well first of all, it should be stated that it’s not the political oddsmakers’ job to tell the great British public the result, or indeed to get it right as regards the favourite winning. They are there to make a book, and then react to market forces, and to ensure their paymasters make a profit on the turnover.
Now, don’t get me wrong, this practice can, and does result in the favourite winning and as such following market moves can usually be a fair indicator of the way any political event will turn out… but not always. Favourites don’t always win, and outsiders can be successful – just ask all those who backed Leicester City to win last year’s Premier League title.
In a recent SBC News article I shared regional and national turnover and bets information on the referendum from Unibet. The weight of money (WOM) was overwhelmingly for Remain (65% of the turnover), but interestingly more bets (number of) were actually placed on Leave – some 60%. I wonder how many picked up on that point?
What I take from this amazing result (from a betting perspective) is that the world of political betting in the UK is fraught with dangers.
Now more than ever in our lifetimes we are a fragmented country – with real regional differences and interpretations regarding policies and our take on the political personalities purveying them.
Bookmakers and punters need to invest even more time in analysing how the country as a whole view national issues, and pay more attention to local interests and regional dilemmas. And this may give us an edge.
One thing is sure though, it’s odds on that political betting will be under the microscope for the next general election.
SBC: In the space of 12 months the UK has seen two politically and publically charged referendums; how does this as a market (the referendum) differ to usual political markets? How should a bookmaker gauge public feeling?
Matthew: The Referendum beat last year’s general election to become our biggest ever political market (that in turn had overtaken 2014’s Scottish Indyref). That confirmed the pattern of politics being a big and rapidly expanding part of Ladbrokes’ business. Back in 2005 we only took a few hundred thousand pounds on the general election all told; a few hours trading on the vote on Thursday comfortably exceeded that.
We saw huge amounts of interest from the media, financial institutions and even foreign governments in our prices and put quite a bit of effort into trying to communicate the betting forecasts to the wider public. There were over 750,000 views of the online Ladbrokes’ Betting Barometer which had live updated odds, converted into probabilities for either side winning.
That has led to a bit of a backlash from certain types criticising the bookies for “getting it wrong”. To be fair to Ladbrokes, we were never waving our hands about saying “we’re always right”, and tried to caution against assuming the favourite was bound to win or that betting markets were a flawless forecasting tool. Still, it poses a bit of a problem when trying to ask people to listen to our analysis in future.
Onward and upwards though, and I’m confidently predicting that this year’s US Election will beat all of the previous records again (assuming it doesn’t become a very one-sided contest). Talk of a snap 2016 UK general election is a bit worrying, just because I’m not sure how we’ll logistically cope with having to run that in the weeks before a US vote. Probably shouldn’t complain.
Over 72% turned out to vote in the EU Referendum. Going forward what does high voter turnout entail for bookmaker markets?
Warren: There was clearly a lot of money matched on Betfair and bet across the industry.
I think the high turnout did have an impact on betting making it a more popular market but I‘m more inclined to believe that the huge money came from Forex and other city traders.
In regard to the possibility of whether turnout will have impact on betting in the future – for sure, we always learn from history and will do this at Tonybet. This 72% turnout will also be a factor in future bookmaking decisions. Previously we all thought that betting markets were the guide for elections over the polls, especially after the last UK General Election, but when turnout is high perhaps it isn’t?
What is the market saying about the potential for a Great British Break Up?
Jamie: I think betting markets, much like the financial markets, are still recovering from the seismic events of the referendum. Of course the importance of a potential split up of the UK is massive- but so was Cameron’s resignation, so was Corbyn’s cabinet quitting, never mind the tough line response to Brexit from EU big wigs.
The call for a second Scottish Independence referendum is loud, clear and has a fair mandate- but the market only makes a referendum before the next general election a 50/50. I personally suspect to race that vote through after two years of wrangling with the EU and before 2020 is a big ask, and it’s more likely once a bit more dust has settled on Britain’s Brexit deal.
If the Scottish referendum was tomorrow, I’d say it would be a 1/2 shot for the Scots to leave, such is the feeling of outrage north of the border. But four or five years down the line it’s much harder to call, and I agree with the market making Scexit only about a 53% chance at the moment.
Whatever happens the Welsh are staying with the English, they voted very similarly on Brexit- and there isn’t a huge clamor for independence. The Northern Irish situation is much more delicate, and not one I think betting markets should covering at present.