In the face of a devastating defeat the government has pulled the meaningful vote leaving Brexit in chaos.
Even though ministers and Number 10 repeatedly assured the country the vote would go ahead as planned, Theresa May has been forced to perform an embarrassing U-turn.
The prime minister’s authority is now in tatters after she conceded there was no chance her Brexit deal could get through parliament.
Ministers are believed to have been told of the decision during an emergency cabinet conference call.
A government source said she will now make a statement to the House of Commons at 3.30pm outlining what will happen next.
The pound fell sharply in response, shedding 0.5% versus the US dollar to stand at 1.26. Against the euro, the pound was 0.8% down at 1.10.
May’s hastily-arranged statement is widely expected to confirm that she intends to seek further concessions from Brussels to try to win over rebellious backbenchers.
The statement will be followed by leader of the Commons Andrea Leadsom announcing changes to parliamentary business for the days ahead, and Brexit secretary Stephen Barclay will then make a statement to MPs on the Article 50 process.
Labour leader Jeremy Corbyn said the UK no longer had a ‘functioning government’ and called on the PM to switch to his party’s plans for a ‘jobs-first deal’.
‘We have known for at least two weeks that Theresa May’s worst-of-all-worlds deal was going to be rejected by parliament because it is damaging for Britain,’ he said.
‘Instead, she ploughed ahead when she should have gone back to Brussels to renegotiate or called an election so the public could elect a new government that could do so.
‘Labour’s alternative plan for a jobs-first deal must take centre stage in any future talks with Brussels.’
On Twitter, SNP leader Nicola Sturgeon challenged Corbyn to work with the SNP to ‘give people the chance to stop Brexit’.
Scotland’s first minister tweeted: ‘So Jeremy Corbyn – if Labour, as official opposition, lodges motion of no confidence in this incompetent government tomorrow, the SNP will support and we can then work together to give people the chance to stop Brexit in another vote. This shambles can’t go on – so how about it?’