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Oct. 12, 2016, 4:49 a.m. EDT

U.K. leader’s backdown on parliament scrutiny eases fears of ‘hard Brexit’

Government makes surprise climbdown over Brexit plan

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By Barbara Kollmeyer, MarketWatch

AFP/Getty Images
U.K. Prime Minister Theresa May at the Conservative Party conference on Oct. 5, 2016.

U.K. leader Theresa May has backed down over allowing lawmakers to scrutinize the government’s plan for the Brexit process, according to media reports.

In what is seen as a climbdown, the government late Tuesday filed an amendment to a motion from the opposition Labour Party that asked for a “full and transparent debate” on the plan to separate Britain from the European Union, media reports said Wednesday.

The British pound, down over 5% just this month alone, rose against the dollar /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.0310%   in the wake of the reports. The U.K. currency was at $1.2234 early Wednesday, from $1.2124 late Tuesday in New York.

“It has triggered a relief rally in the pound on Wednesday, as it could potentially limit the prospect of a ‘hard Brexit’ taking the U.K o.ut of the single market, which has been a major concern for some investors and the business community in recent days,” said Kathleen Brooks, research director at City Index.

But the amendment also asks that members of parliament do not attempt to stop Brexit or to jeopardize the government’s position in its withdrawal talks.

It reads: The House “believes that the process should be undertaken in such a way that respects the decision of the people of the U.K. when they voted to leave the EU on 23 June and does not undermine the negotiating position of the Government as negotiations are entered into which will take place after Article 50 has been triggered,” the Daily Mirror reported .

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In a recent speech, U.K. Prime Minister May raised fears the U.K. was headed for a “hard Brexit,” or clean break from the EU’s single market, a more drastic separation than had been hoped for by those concerned it would hit the country’s industry and economy. The pound fell to fresh 31-year lows against the dollar after that speech.

Read: The markets are terrified of a ‘Fawlty Brexit’

But with the amendment, the government has opened the way to wider oversight of its plans, and this is seen as limiting May’s push for a hard Brexit.

However, it omits a key call from the Labour Party, that there should be a full vote in parliament before Article 50 is triggered and the formal process of a departure from the EU begins.

Read: What could happen to America is playing out in Britain

A potential rebellion by members of the governing Conservative Party, also known as “Tories,” is seen as having forced May’s hand. Tories opposed to a hard Brexit were thought to be ready to ally with Labour MPs to back the motion, risking an embarrassing defeat for the government.

On Wednesday afternoon, the House of Commons will debate the motion, with the government amendment.

— Karen Friar contributed to this report.

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Barbara Kollmeyer is an editor for MarketWatch in Madrid. Follow her on Twitter @bkollmeyer.

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