How to make the Brexit 'Sunderland trade' as early results come in

Author: Adam Button | Category: News

Sunderland is often the first to report results

The UK referendum results will trickle out from one regional poll to the next.

The first true results are likely to come from Sunderland, which is nowhere near as important as this map implies.

There's been a study from a UK academic named Chris Hanretty. He broke down the demographics of various voting districts including Sunderland.

His model projects that the 'Leave' side should be 6 points ahead, so 53% to 47% for a Brexit.

What that would mean is that polling has been largely right and that the Remain side should win nationally.

So the first trade is to buy cable (assuming decent liquidity and spreads) if that gap is 6 points are smaller, especially if there's a dip because the market misinterpreted the results.

Obviously there will still be a substantial amount of uncertainty and it won't take long for more numbers to begin crossing but if the Remain side wins Sunderland, he said, it's almost a sure thing that they will win the referendum.

'If the result in Sunderland is very close, then Remain has probably won," he wrote.

'I said that we should expect Leave to be six percentage points ahead in Sunderland. That's my best estimate of the gap in Sunderland, but it's come with uncertainty. 

'If, God forbid, the referendum were to be repeated 100 times, then ninety times out of one hundred I'd expect the gap to be between Leave 14 percentage points ahead and Remain one percentage point ahead. 

'That means it's not impossible that Leave will win whilst losing in Sunderland. But it would be difficult.'

Others that he modeled:

  • Swindon - Leave should win 59-41%
  • Wandsworth - Remain should win 69-31%
  • City of London - Remain should win 71-23% (reports very early)
  • Lancaster should be a good bellwether for the nation

He also made this gif about when the results should come in:

He also made this chart showing that there's a bias among early-reporting districts towards the Remain side.

The trade here is that if Remain is only slightly ahead (like 1 point or less) a shock might be brewing because the late-reporting districts will favour Leave.

Of course, that assumes that districts follow historical norms for reporting times. If you'd like a district-by-district breakdown of Hanretty's model to compare, see it here.

On the same topic, Populus has more:

As we get to election night, what can the early counts tell us about the final result?

Normally results from areas like Sunderland, Newcastle, Stockport, Wigan (heavily Labour), Malvern Hills, Basildon, Hart (Tory heartlands) won't tell us much about who will win the General Election. However, we think that a number of early declarations will give strong indicators of the likely direction of the night. Whether it's a narrow win for leave or remain, or whether remain is some distance ahead.

What's interesting is that a number of early declarations comprise some of the most Eurosceptic and "Remain-y" parts of the country. Sunderland (12.30), Hartlepool, Oldham, Swindon, Merthyr Tydfil, Wigan, and Basildon (all between 1.00am - 1.30am) should all show massive leave victories, if it is to have a chance of winning nationally. By contrast early declaring London and Scottish Local authorities (City of London, Wandsworth, Ealing, East Ayrshire, and Stirling) should give remain some of its biggest wins of the night.

If Leave is going to win, it needs to be scoring 60%+ in Sunderland, and in the high 60's in Hartlepool; one of its heartlands. If the leave vote is nearer 50% in Sunderland and 60% in Hartlepool then Remain can start to feel confident.

There are though amongst the early declarations some "bellwether" authorities, likely to be closer to the national result. Newcastle upon Tyne (1.00am), Stockport (1.30am), Denbighshire (1.40am), Hart and Malvern Hills, (2.00am), Hertsmere and High Peak (2.30am) are places that you would never normally politically group together. However, they are for one night only likely to show similar vote shares in this Referendum, vote shares, which crucially, should be somewhere near the national average revealing how this Referendum is simply not business as usual.

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