U.K. lawmakers rejected Britain crashing out of the European Union without a deal, lining up a new vote March 14 to delay the March 29 Brexit date.
The House of Commons backed a proposal by Tory lawmaker Caroline Spelman opposing a no-deal exit under any scenario in a 312-308 vote. It then passed the main government motion against a no-deal Brexit in a 321-278 vote, a day after Parliament threw out Prime Minister Theresa May's revised divorce deal for the second time.
Sterling was up approximately 1.1% against the U.S. dollar before the first vote on the Spelman amendment, and gained further right after the vote as the risk of a no-deal crash out of the EU lessened. "The potential delay of Brexit is what is helping to hold up the pound, but by the same token, the uncertainty is limiting its upside potential," Forex.com market analyst Fawad Razaqzada said in a research note before the vote. By 5:20 p.m. ET on March 13, the pound was trading 2.1% higher, at almost $1.34, its highest mark since June 2018.
With the no-deal option voted down, lawmakers will decide March 14 whether to postpone Brexit beyond the current March 29 deadline, with the possibility of an extension of two to three months. European Council President Donald Tusk said March 12 that the U.K. must present a "credible justification" for delaying the Brexit date.
However, a no-deal scenario remains the default path unless the U.K. and EU can finalize a withdrawal agreement before any new deadline.
"I will repeat what I have said before ... the legal default in U.K. and EU law remains that the U.K. will leave the EU without the deal unless something else is agreed," May said in a statement immediately after the vote.
According to the government motion proposed for March 14, the government will seek an extension to the Brexit date until June 30 if lawmakers approve a divorce deal with the EU by March 20.
"Such a short technical extension is only likely to be on offer if we have a deal in place," May said. "Therefore, the House has to understand and accept that, if it is not willing to support a deal in the coming days, and as it is not willing to support leaving without a deal on 29 March, then it is suggesting that there will need to be a much longer extension to Article 50."
May echoed a warning by European Commission President Jean-Claude Juncker that a long Brexit extension would require the U.K. to participate in European Parliament elections May 23-26 because it would continue to be part of the bloc.
In a statement following the vote, the European Commission agreed with May that rejecting a no-deal Brexit is not enough to take the scenario off the table.