Politics: Several ways to lose a deposit
By Huw Richards
Published: September 25 2009 01:59 | Last updated: September 25 2009 01:59
Governments that fear they may be mere months from oblivion must take comfort where they can. So a listing on Intrade, the Ireland-based predictions exchange, has to be counted good news – or at least as good as it gets – for Gordon Brown and colleagues.
Eighth on the list of the markets currently most favoured by Intrade’s predominantly American clientele – and shoehorned between the Democratic and Republican prospects in the forthcoming election for Governor of Virginia – was the one on the likelihood of a Labour victory come the forthcoming UK General Election.
Admittedly, one element in this is that Labour’s hopes now appear to have receded to a point that they offer the thoughtful trader a potentially lucrative long-shot with only a limited downside. A win on a predictions market pays out at 100. Intrade rated Labour’s chance of being largest party following the next election at 15.
Still, it represented a marginal improvement on a site whose traders have earned a formidable reputation for collective wisdom – predicting all 50 states in the tightly-contested US presidential election of 2004, and in 2008 missing only on two, whose outcome was so close that they took some days to resolve.
As the UK election looms, spread betting and prediction sites can expect a sharp rise in political business. Interest inevitably follows the electoral cycle, spiking at election time after long periods of quiet. This is one reason why politics tends to be an add-on for companies whose main business is in more consistently appealing fields.
Politics has won Intrade a lot of publicity, but its core markets are financial. In Britain, politics tends to be the concern of companies that otherwise focus on sport.
Wayne Lincoln, trading spokesman for Sporting Index, says: “It builds into very good business at election time and brings in customers who don’t usually bet on sport, except perhaps on the Boat Race.”
By far the largest market at present – Mr Lincoln puts it at 95 per cent of SI’s politics business – is the number of seats gained by each party at the next election.
There has been little good news for Gordon Brown in the way this market has progressed. When he became prime minister in July 2007, Labour and the Conservatives were nearly level. The initial “Brown bounce” took Labour almost 100 ahead at 330-336 against 234-240 for the Conservatives.
But by the end of the year, Labour was back to 267-273 against the Conservative 300-306 – and its position has steadily eroded since: “Whatever goes wrong, it seems to stick to Labour at the moment,” says Mr Lincoln.
Recently, Labour has been rading at 205-210 on Extra bet, compared with a Conservative spread of 354-359 and the Liberal Democrats at 50-53.
The range of markets will grow as the election approaches. Sporting Index expects to add a considerable number on issues such as the number of women MPs and the time of the first declaration on election night.
It also has a market on the identity of the next chancellor of the exchequer. Mr Lincoln explains: “We put that up when it seemed likely Alastair Darling might go.” With that now seeming unlikely this side of the general election, the market leader is George Osborne, the shadow chancellor, with his deputy Philip Hammond running second.
One bet that might seem equally popular is the identity of the next Labour leader, but there is as yet only limited interest. Chris Shillington of Extrabet says: “We offered a fixed-odds market on that a few months ago. It got us a fair bit of publicity and a lot more traffic on our politics markets in general, but not a single bet was laid on it.”
Anyone who still fancies Boris Johnson’s chances of being the next Tory premier can back their hunch on Intrade, which puts its probability at about 6.9 per cent. Carl Wolfenden, Exchange Operations Manager, says: “That was a market we put up at the request of a member and there have been 53 contracts traded, which isn’t bad.” Several of Intrade markets originate in such suggestions. Mr Wolfenden says: “One example was presidential endorsements last year, which created a lot of interest.”
If hardly on the scale of a US presidential election, a British poll represents useful business for Intrade, which traded more than 17,000 contracts on the 2005 General Election. Much depends on how close it looks – predictions sites thrive on close-run things. The British poll at the moment seems rather too predictable, as does Germany’s election this month, with Intrade rating incumbent Angela Merkel as 95 per cent likely to continue in the job.
Still, US politics continues to offer much to intrigue Intrade’s clients. One particularly strong market at present is on President Obama’s health reforms, with agreement to a Federal-run health plan before the end of this year reckoned at 20.5 per cent.