In the last few days, betting markets were pretty confident that British voters would reject Brexit — a British exit from the European Union. A few hours ago, they showed the odds of Britain leaving the UK around just 20 percent.
But in the past few hours, as voting results have started to trickle in, the numbers have changed dramatically. As I write this, prediction markets are now showing a 96 percent chance of "Leave" winning:
Of course, betting markets could still be wrong, as only about half of votes have been counted. But things are starting to look grim for those rooting for Britain to remain in the European Union.
A British exit could be bad for the British economy
Economists say the stakes in the vote are high.
In the short run, uncertainty about Britain’s future relationship with the EU, its largest trading partner, could push the UK into a recession. If Leave supporters win, market watchers predict an "explosion of volatility" on Friday morning as the markets process the implications of Britain’s exit.
Many economists expect both the British stock market and the pound to open lower on Friday morning. Britain’s chancellor of the exchequer, George Osborne, even hinted that he could suspend stock market trading if Britons voted to exit the EU.
In the long run, the situation could be worse. The UK government has estimated that exiting the EU could cause the British economy to be between 3.8 and 7.5 percent smaller by 2030 — depending on how well negotiations for access to the European market ultimately go. Other reports have found smaller but still significant impacts.