U.K. Prime Minister Theresa May suffered a humiliating defeat of her proposed EU exit deal Tuesday, as lawmakers rejected her motion by vote of 432 to 202, setting up the possibility of a collapse of the government and fresh national elections.
May's European Union Withdrawal Motion, a painstakingly-brokered agreement that took months to reach the House, had divided Brexit supporters and opponents alike, even as May argued that it remained the best and only option to deliver on the result of the 2016 referendum to leave the European Union.
The pound jumped 1.1% against the U.S. dollar to trade at 1.2810 following the vote, with opposition leader Jeremy Corbyn tabling a vote of non-confidence in the government that will be debated in Parliament on Wednesday.
May's plan, which had originally been tabled for a vote in early December, was delayed in the face of cross-party objections over the nature of the so-called Irish backstop, a clause in the Withdrawal Agreement with Brussels that would kick-in if the two sides failed to reach an longer-term arrangement on trade after Britain formally leaves the EU on March 29.
"There are some in Westminster who would wish to delay or even stop Brexit and who will use every device available to them to do so," May said in a prepared speech at a factory in the industrial heartland city of Stoke-on-Trent. "People's faith in the democratic process and their politicians would suffer catastrophic harm. We all have a duty to implement the result of the referendum."
"While no-deal remains a serious risk, having observed the events at Westminster over the last seven days, it's now my judgment that the more likely outcome is a paralysis in Parliament that risks there being no Brexit," May added.
The pound was marked 0.42% higher against a weakened U.S. dollar Monday and pegged at 1.2873, the highest since November 22, as investors bet the parliamentary impasse could potentially trigger a softer exit from the EU that would maintain Britain's access to the single market.
May's deal had been dealt yet another blow by European Commission President Jean-Claude Juncker, who insisted in a letter to U.K. lawmakers that its terms couldn't be changed, and that while neither side wished the "backstop" to remain in place, he could not guarantee that it wouldn't.
"If the backstop were nevertheless to be triggered, it would only apply temporarily, unless and until it is superseded by a subsequent agreement that ensures that a hard border is avoided," the letter stated.
Should May and her EU counterparts fail to reach a deal on future trade, Britain would face the choice of either remaining in the European customs union, preventing it from signing free-trade deals with the United States and others, or exiting the EU customs union and establishing a so-called "hard border" between Northern Ireland and the Republic of Ireland, a move that would contravene the 1998 Good Friday peace agreement.
Myriad options will be be available in terms of the government's next step now that May's Withdrawal Motion has been defeated, including tabling a similar deal with more forceful legal language.
Corbyn, who heads the U.K.'s Labour Party, has said he will call for a vote of no-confidence in the government if the deal is defeated, a move that could trigger fresh national elections, but indicated over the weekend that he would prefer a new deal with Brussels over a second referendum on Britain's EU membership.
"My own view is that I would rather get a negotiated deal now if we can to stop the danger of a no-deal exit from the EU on 29 March which would be catastrophic for industry, catastrophic for trade," he told the BBC's Andrew Marr program Sunday.