The European Union offered to postpone the U.K.'s departure from the bloc until May 22 if the U.K. Parliament hammers out an elusive Brexit deal in the next week, and also offered a new brake against a no-deal Brexit, giving London until April 12 to decide on its course of action if its lawmakers again fail to reach an accord.
Despite a shorter duration than requested by U.K. Prime Minister Theresa May, the extension could give a reprieve from the default scenario of a no-deal Brexit when the U.K. is scheduled to depart the EU at 11 p.m. on March 29. Crashing out of the EU with no withdrawal agreement in place would see the U.K. falling back on WTO rules that would push up tariffs and erect non-tariff barriers that threaten to block the supply of goods.
All 27 non-U.K. heads of state in the EU approved the offer during a European Council meeting, council President Donald Tusk announced late March 21.
Sterling was down more than 1% against the U.S. dollar, reaching a low just above $1.30 in the late afternoon ET as EU leaders negotiated the details of the response to May's extension request. As of 6:45 p.m. ET, the pound was trading at $1.313.
"The U.K. Government will still have a choice of a deal, no deal, a long extension, or revoking Article 50," Tusk said. "The 12th of April is a key date in terms of the U.K. deciding whether to hold European Parliament elections. If it has not decided to do so by then, the option of a long extension will automatically become impossible."
EU parliamentary elections begin May 23, and May has said that the U.K. will not take part in them.
"A short extension would give Parliament the time to make a final choice that delivers on the result of the [June 2016 Brexit] referendum," May told reporters earlier as she arrived at the European Council meeting.
The U.K. was due to leave the EU on March 29 with or without a withdrawal agreement in place and a political declaration that sets out the framework for future U.K.-EU ties. However, May on March 20 asked Tusk to extend that date to June 30, a week after British lawmakers rejected her Brexit deal for the second time and also rejected a second time.
May told Tusk on March 20 that she still plans to bring her Brexit pact back to the House of Commons and table a motion "as soon as possible." U.K. House of Commons Speaker John Bercow warned March 18 that May's deal, without substantial changes, cannot be put to another vote in the chamber.
In a public address late March 20, May said she was not prepared to delay Brexit any further than June 30.
"I passionately hope MPs will find a way to back the deal I have negotiated with the EU, a deal that delivers on the result of the referendum and is the very best deal negotiable," she said.
The U.K.-based Trades Union Congress and Confederation of British Industry urged May in a letter to consider an alternative plan, saying the current deal or no deal must not be the only choice.
"Our country is facing a national emergency," the group said in the letter, seeking an urgent meeting with May. "We cannot overstate the gravity of this crisis for firms and working people."