The UK's commentariat is hyperventilating, making all sorts of long-range predictions based one or two topical data points like last night's European Council. No breakthrough was expected, none happened. On the contrary, the European Council even weakened the language on Brexit from earlier drafts, dropping the previous offer to explore the possibility of further assurances and the wording that the backstop was not a desirable outcome. This is a very typical and successful negotiating strategy - to harden your position when you feel you are coming under pressure. 

The European leaders certainly rejected the demand to put a one-year time limit on the backstop. 

So what is Theresa May's game now? We believe her strategy is what is referred to in the House of Commons as running down the clock. This means to go right to the edge and confront both her domestic critics and the EU with a binary choice. It is not clear what the nature of that choice will be - deal versus no-deal or deal versus referendum. That will depend in part on how MPs have lined up by then.

But we conclude that there cannot be any agreement for as long as some members of the European Council, including Leo Varadkar, are betting on a second referendum and for as long as there are five Brexit positions in the House of Commons: support for her deal, a softer version of the deal, a customs union, a second referendum and a hard Brexit. As any political strategist knows full well, you need to narrow the choices to a binary selection between your objective and an unpalatable alternative. We believe that in the end, the choice will be deal-vs-no-deal, as there are more supporters for a moderate Brexit to be picked up than there are hard Brexiteers. But she may decide to play a different strategy. The process could well extend all the way into February or even March. 

The real difficulty for May's plan A strategy will be to get reassurances on the backstop that are acceptable to both the EU and the DUP. That may or may not (no pun intended) be possible. Yesterday she tried and failed with her proposal for a one-year limit. She also raised the possibility of a commitment to an end date for the trade talks. The EU is wondering whether May is really seeking assurance on what was agreed, or seeks to change what was agreed. The FT quotes Michel Barnier as saying that May appeared to be going back on an issue they thought was settled in the negotiations. 

As we are entering the endgame, Brexit remains an extraordinary difficult process, but we don't think that the chances of a deal are as bad as published opinion would suggest. There are a series of strategies that might lead to the goal, the first and obvious one is the one she pursues - to get a legally binding statement from the European Council to provide further details on the Irish backstop. If this is not possible, she could run the following alternative strategies. Here is a list of our plan B options.

• change her red lines and cut a deal with Labour: keep the withdrawal agreement as it is, but change the political declaration to accommodate a customs union or Norway model. Would deepen Tory divisions, and could lead to new elections. DUP might support shift in red lines, as Norway or customs union would be less offensive from their point of view than a Canada-type deal;
• Run down the clock and confront the EU and Ireland with the choice to weaken the backstop or no deal. Big risk of miscalculation on both sides, but hard to see that EU and Ireland will maintain its current position all the way to the finishing line.
• run down the clock in the UK: either threaten her party with elections or a second referendum, or threaten moderate Labour MPs with no-deal Brexit. 
• Call elections: If the Commons reject the deal, she may seek the required two-thirds majority for an election. She would fight these elections as Tory leader. Our expectation is that she stands a reasonable chance to improve on the Conservatives' share of MPs.

One of the few British commentators who see this situation very similar to the way we do is Allie Renison (@AllieRenison) from the Institute of Directors. She wrote yesterday:

"I truly think PM feels she has a duty to stick out trying to get the withdrawal agreement through for an orderly Brexit, but if it fails, I also truly think she feels she has a duty to have UK leave EU next March. And I think some people underestimate the latter of those feelings."

We think that her chosen strategy will be either to call elections, or to run down the clock. We don't think that the UK parliament will have the majorities to stop her. We noted a rather amusing calculation yesterday by someone who added the number of MPs who supported her deal, and the number of hard Brexiteers, and who concluded that the remaining 305 MPs would support a second referendum - as opposed to the 130 or so who are openly committed to it now. Even if that number were true, it would not secure a majority.

The Guardian reports that Labour would throw the entire gamut of parliamentary procedures to make it harder for May to run down clock, but we believe one should not underestimate the powers of a sitting government to control timetables and procedures. We see no chance that a confidence motion by Labour could succeed while May is running down the clock. And she will continue running down the clock until the EU, Ireland, her MPs, and at least some Labour MPs, come off their positions, and if not, be ready to take it over the brink. We would not even rule out a last minute deal on the evening of March 29, followed by a procedural extension.