The U.K. government on Wednesday rejected Prime Minister Theresa May's motion to leave the European Union without a withdrawal agreement.
Members of Parliament voted 312-308 against the proposal for the U.K. to exit the EU without a new trading agreement, following a rejection Tuesday of Ms. May's withdrawal agreement.
In a non-binding vote, MPs also rejected a no-deal Brexit under any circumstances 321-278.
After the no-deal Brexit was rejected Wednesday, the U.K. MPs will vote Thursday on a motion to approve an extension to Article 50, which will extend the deadline for the U.K.'s exit from the EU beyond the original exit date set for March 29.
A clear majority of MPs supported a no-deal Brexit, Ms. May said. However, according to legal definitions in U.K. and European law, the U.K. will exit the European Union without a deal unless some kind of deal is agreed to, she said. "We could have a deal that was negotiated that is on the table," Ms. May said, referring to the withdrawal deal that was soundly defeated in a vote Tuesday. Ms. warned a second referendum would damage the trust of the public in the U.K. government.
The approval of an extension will give Ms. May the power to ask EU leaders to extend Article 50. However, all 27 EU leaders will have to unanimously accept the extension before March 29.
Ms. May warned extending Article 50 would require a longer extension than initially planned and would require the U.K. to take part in the elections to the European Parliament in May.
The pound sterling rose 1.4% vs. the dollar to $1.32 Wednesday, while the FTSE All-Share index rose 0.1%.
"A rejection of no deal tees up an extension of Article 50, and we've seen sterling rally today to price that eventuality in," said Stephanie Kelly, senior political economist at Aberdeen Standard Investments, in an emailed response to the vote. "Sterling's roller coaster will continue in the days ahead though, and key factors determining the size of any moves are whether the EU grants an extension, how long that extension would be and the possibility that (Ms.) May runs out of political road and we end up with a snap general election."