Nearly three years after the UK voted to leave the European Union (EU), the deadline for Brexit is less than two weeks away and the British government is asking for more time. While it’s easy to be distracted by the ongoing chaos in Parliament, it’s important to maintain a steady focus on the underlying parameters of the debate and the range of possible outcomes. These have shifted less than might be imagined.

First, a quick recap of what happened last week. On Wednesday, British Prime Minister Theresa May suffered another crushing defeat on her Brexit plan. On Thursday, Parliament voted to seek a three-month extension of the rapidly approaching March 29 deadline for leaving the EU.

There’s little clarity—and less predictability—over what might pan out in the coming days. Will Prime Minister May’s leadership survive? Will she call an election? Could she get her Brexit deal through at a third or even fourth attempt?

Looking Beyond the Noise

Stripping aside the chaos of the daily developments and countless news stories, the main parameters that are shaping the Brexit endgame haven’t really changed:

•Not many lawmakers want a no-deal Brexit, but it’s a challenge to get them to avoid this outcome by coalescing around a specific plan—and by crossing party lines to do it.

•The EU wants to avoid a disruptive no-deal Brexit, but not at any cost. It’s unlikely the EU will turn down the June 30 deadline extension, but it will want a good reason and maybe some conditions.

•The UK ultimately has only two choices if it wants to avoid a no-deal Brexit: revoke Article 50 (almost certainly requiring a second referendum) or ratify a withdrawal agreement that might look very similar to the current one.

•There’s more support for a second referendum now, but it still faces opposition on both sides of the House—an amendment was heavily defeated last week. A second vote is not yet the default option.

With these factors in mind, there are a number of possible routes forward for the Brexit saga.

Assessing the Potential Brexit Paths

1) The third time is the charm for May’s plan. The idea that the Prime Minister manages to get her deal through Parliament on the third try might be fanciful following last week’s huge defeat, but she clearly has not yet given up hope. In fact, she has a better chance of convincing dissident Tory MPs to vote for her deal once a no-deal Brexit has been eliminated as an option.

2) Parliament grabs the reins and crafts a deal. Parliament could take over the Brexit process, hold a series of votes and produce a Norway-plus deal or a permanent customs union as the winner. This would test government unity, require some tricky votes to pass enabling legislation, and necessitate a technical extension of the Article 50 deadline. But it would be the most positive short-term outcome for the pound.

3) Lawmakers need to ask for even more time. If Parliament can’t come together on any of the Brexit options, a longer extension of Article 50 would be requested to enable either a general election or second referendum. If the second referendum led to a decision to stay in the EU, markets would be jumpy for a while but ultimately pleased. But it’s important to note that the outcome of a second referendum is not a given.

4) A no-deal Brexit actually happens. It’s possible that no agreement can be reached and the UK ends up leaving the EU without a deal, either on March 29 or after a short extension. While this is the least likely scenario, it still can’t be dismissed completely.

We still feel that the odds are slightly better than 50% that the UK leaves the EU with a deal. Staying in the EU is the next most likely outcome and a no-deal Brexit the least. But Brexit is ferociously complicated, making it impossible to predict exactly how and when this will all play out.

Also, the route toward a withdrawal agreement (our base case) now looks more likely to be led by Parliament than by the Prime Minister (option 2 above). This ultimately points to a softer form of Brexit, which helps explain why the pound has been resilient in the face of unprecedented political turmoil.

So, What’s Next?

As things stand now, the Prime Minister plans to hold a third vote on her Brexit deal this week. If the plan passes (and there are signs it could be close), she will request a technical extension at this week’s EU summit and we can all forget about Brexit for a while. If May’s Brexit plan is defeated again, she intends to ask for a longer extension and will hold a series of indicative votes in April. How the EU responds to this—and what it asks for in exchange—are still open questions.

Darren Williams is Director of Global Economic Research

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. AllianceBernstein Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

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