JPMorgan said there was about a one third chance of a no-trade deal Brexit at the year end but that brinkmanship between Britain and the European Union over coming months would make it appear a much greater risk.
Britain left the EU on Jan. 31 but talks have so far made little headway on agreeing a new trade deal with the bloc by the time a status-quo transition arrangement ends in December.
"The chance of no-deal is about a third, but with brinkmanship part of the process it may appear higher than that before agreement is reached," JPMorgan analyst Malcolm Barr said in a research note to clients.
EU chief Brexit negotiator Michel Barnier said on Wednesday that Britain must engage now with EU demands on guarantees of fair competition, fisheries and solving disputes in order to seal a deal on new trade ties by a "strict deadline" of end-October.
Barnier said London has so far not shown enough flexibility and creativity on these. But he believed a deal on a new relationship to replace decades of close-knit cooperation after Brexit from 2021 was still possible, if difficult.
Britain and the EU are due to hold talks in London on Sept. 7-11.
"It would be a surprise to us if enough progress were made to bring agreeing a Treaty by end October into view," JPMorgan's Barr said.
"The absence of that progress will generate pressure for interventions from UK and EU leaders; however, at this stage, we see little that suggests any major softening in the EU's position or unity around it," he said.