Faisal Islam, Political Editor

There will be nothing quite like the next three months in British politics. So many of the random, unpredictable, almost revolutionary currents seen in and beyond Westminster over the past three years will have to start to settle in some form. Anyone who says they know how this will pan out, even by Christmas, is lying (unless, of course, they were telling you 18 months ago that Theresa May would be in Number 10 negotiating the UK's exit from the EU with the support of the Democratic Unionists, after losing a string of seats to a Labour Party led by Jeremy Corbyn which won over 12 million votes, and seeking solace with a trade deal from Donald Trump at the White House). Soothsaying is not what it was.

What is possible though, is to discern the currents and crosscurrents that will determine the Brexit weather, in Government, Parliament, diplomacy, business and economics. And there have been some rather decisive changes over the summer.

There will be a transition period, or at least that is now a negotiating ask for the UK, agreed by the Cabinet. As Liam Fox told me, somewhat unexpectedly, on the lawn of the headquarters of the World Trade Organisation in Geneva in July, he had waited for Brexit for 43 years - "another couple of years" would be "common sense". It was a point that had been made directly by the Chancellor, and came out publicly on the day that business leaders gathered at Chequers to raise concerns over Brexit strategy.

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The Government, in its papers on the future partnership, has also accepted the notion of some role for the European Court of Justice in a transition period. Beyond that, as a reference point for the UK legal system, it has referred to the EFTA Court, adjudicator of the European Economic Area (i.e. single market) as a possible model for resolution of disputes between the post-Brexit UK and EU. The direct jurisdiction of the ECJ will end, reiterated the papers, but that allows for indirect effect, or more pertinently quasi-direct effect, as currently exists for Norway, Iceland & Liechtenstein.


In a carefully worded written ministerial statement in July, Brexit Secretary David Davis wrote that the Government recognised that it has obligations to the EU "that will survive the UK's withdrawal" - an acknowledgement Brussels had been waiting for. There IS a financial bill to settle. Since last autumn officials have been working on the basis of around £30bn to £40bn of previously made commitments from the point of EU withdrawal - though at the same time querying the exact legal basis for the EU insisting on them. "In the medium to long term we're not going to be paying great big payments," said Mr Davis at the weekend, rather confirming that in the short term, we very well might be.

On all of these matters the UK's position has shifted somewhat from previous public posturing in the direction of the European Union's stance. And that is before face-to-face negotiations on much of it.

Depending on your view, Britain is either being flexible and generous, or alternatively acceding to the compromises that were always inevitable. A bit of both is possible. Either way, the direction of travel is not hard to discern. And nor is it hard to see what is driving this - two forms of mathematics: in Parliament and in the economy.

The UK's position has shifted somewhat from previous public posturing in the direction of the European Union's stance. And that is before face-to-face negotiations.

Parliament would prevent a 'No Deal Brexit' if it came to it. In the immediate aftermath of their election flop, around 30 Conservative MPs - including many ex-ministers (and not just the usual suspects) - told Tory whips they could not countenance no deal. No Deal would probably lead to a prime ministerial resignation and surely another General Election. Therefore the PM needs a deal. In fact the PM now wants more than a deal. She needs one quickly, so that she can then agree a transition.

If we need a transition deal, then rather quickly we need to come to agreement on the ongoing Phase 1 of the negotiations. On current form this will not happen in time for the October EU summit. It might happen by December. "My hunch is it won't happen till Christmas," one informed Cabinet minister told me.

Davis' team makes the very reasonable point that elements of the Phase 1 negotiations require a knowledge of the likely end state of the future relationship, in order to make an agreement. The clearest example of this is the transition period. If we want the same deal with the single market in a transition period, then we would be likely to be paying, over around three years, pretty much the same EU payments that constitute the bulk of the so-called "exit bill". So it is a lot easier to reach the "financial settlement", knowing the likely terms of transition.

The post-Brexit Irish border issue

Likewise Northern Ireland. How can you know how to deal with the conundrum of maintaining Irish border arrangements in the absence of knowing about broader UK-EU customs plans?

These are plausible arguments. The essence of how it will play out though is this: who is more desperate for a quick Phase 1 deal and to start to talk future trading relationship? The current time pressure has been caused by the decision to trigger Article 50 in advance of a firmly agreed Brexit plan, and then to call an election.

But the clock is running down in another way too. The Government has been told by business leaders that they too will not wait around until Christmas before making decisions.

In the next three months, board meetings will occur where finance directors will put forward plans for the fiscal year 2018-2019. These plans will have to include an assessment of exactly what the legal position will be with the EU on 30 March 2019. If still unclear, many of these boards will have a responsibility to shareholders to activate 'No Deal' contingency plans that were prepared over the past year. This is most apparent in financial services, but is relevant across the economy.

The Treasury calculates that this has already caused business investments to be put on hold, as corporates keep cash in the bank in anticipation of political turbulence. So far in 2017, the UK economy is the slowest growing in the European Union and the slowest of all the major world economies, having been one of the fastest last year. The weak pound, while offering the prospect of an export boost eventually, is currently hitting household budgets with higher prices.

Image: George Osborne predicted a disastrous recession if the UK voted to leave the EU

Even if it were to have no net effect on the macroeconomy, the sharp devaluation of sterling has still had an impact on many millions of people. "Dynamic Currency Conversion" means that hundreds of millions of debit and credit card transactions carried out by Britons abroad over the summer holidays required a decision to accept extraordinarily weak exchange rates. That is the sort of tangible impact of the post-referendum pound devaluation that voters remember. They were promised it would not happen.

While not the disastrous recession predicted by George Osborne ahead of the EU referendum, UK growth this year is so far oddly slow, and out of kilter with most of the rest of the EU.

This has been the biggest factor in the Chancellor's victory over the summer. It is why a multi-year transition phase is part of the strategy, signed up to by Brexiteers in the Cabinet. It also means that a deal is required. And, as some of Britain's top economic officials have been stressing, there is no point having that transition if it is announced a month before Brexit Day. They have been telling Number 10 that the transition needs to be settled by the New Year. That is at the tamer end of the corporate response. In the weeks after the election one of the most senior UK Cabinet ministers received a letter from a FTSE 100 chief, suggesting that the Government should now tell the country that Brexit will cause too much damage to the economy and that the Government must stop the EU withdrawal.

But the roots of where this is heading stretch well beyond the Commons maths and the weakening economic numbers.

Both major parties had their expectations confounded by June's election. Understanding what drove voters to make the choices they did will go a long way to determine what emerges from Brexit.

The public story from the Conservatives is that they underestimated Jeremy Corbyn - who managed to scam Brexit voters into backing a form of Leave, and Remain voters the opposite - and for good measure excite some exuberant young voters with promises of free cash. Meanwhile, many traditional older Tory voters were turned off by the manifesto fiasco.

Privately, however, there are a host of internal inquests. Former Cabinet minister Sir Eric Pickles has been placed in charge of a particularly important one. So far, only ex-MPs have publicly ruminated about the role of Theresa May's Brexit plan, the mandate for which was the expressly stated rationale for calling the snap election. The strategy of using Brexit to turn longstanding Labour voters and left-ish UKIP voters to the Conservatives failed in all but five seats. Even in some heavily Leave areas, Labour MPs, including ones who had actually voted against Article 50, held their seats, maintaining and even increasing their majorities. Leave voters did not define themselves by their Brexit stance, as the Tory campaign anticipated. Brexit was insufficient to shift many Labour voters long standing General Election affiliation.

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But Theresa May's approach to Brexit did have an effect on the other side of the ledger. Across fertile Cameron-era territory such as the M4 corridor, all the way from London to Swansea - through Slough, Swindon, Bristol and Cardiff - there were 5-10% swings against the Conservatives in areas of high employment.

The tin-eared Number 10 operation failed even to believe the calls, weeks before the election, from sitting MPs in places like Reading and Kensington, that they were in trouble because of a clear organised Remain backlash, including from Tory voters. When it came, the answer from CCHQ, late in the day, was to flood the constituencies with leaflets of Theresa May promoting her Brexit plan.

"We could not have achieved our seat gains at the election without winning Conservative voters over," says one shadow cabinet member. "I would not have expected that at the beginning of the campaign." Indeed, most sitting Labour MPs had no idea, because they were not canvassing in traditionally Tory areas of their constituency.

So where Conservative commentators see 20-something Glastonbury lefties bothering to vote for Jeremy Corbyn, as a proximate cause of the election shock, Labour sees that it won with all under-45 age groups. As one dining companion of the PM puts it: "The penny has now dropped with everyone that we might lose the next election, but no-one knows or agrees why. In the meantime we are losing the Remain-voting middle class."

Meanwhile, a similar internal debate within Labour has happened and appears to have been settled over the summer. Labour consolidated Remain voters over the course of the election campaign, despite being rather vague on its plans. Constructive vagueness worked electorally. At one point Jeremy Corbyn told me that a post-Brexit Britain would consequentially not be in the single market, but that membership of the European Economic Area was an option. They are commonly understood as the same thing.

Shadow trade secretary Barry Gardiner also announced early in the summer that he backed leaving the customs union as otherwise Britain would be left a "vassal state". Shadow Brexit secretary Sir Keir Starmer has since settled that argument decisively in his favour, with all the leadership now backing the idea of staying in both the single market and customs union for an undefined transition period which could last beyond the end of this Parliament. Some shadow ministers were fired for backing Chuka Umunna's amendment to the Queen's Speech advocating longer term single market membership in June. And yet now this is not ruled out, subject to a Labour government being able to reform Freedom of Movement.

Mr Corbyn is finding diplomatic returns to his relative success in June's election. Doors have flung open across Europe as left-wing leaders seek contact and association with the Labour leader's perceived political success. In return Mr Corbyn genuinely believes he now has better contacts with EU leaders than Theresa May. In particular, his plan to "stop undercutting" workers through a reform to the EU Posted Workers Directive, a staple of his referendum speeches, is now also the agenda of the French President's European reform plans. This is why Labour claims it can achieve what Theresa May is told by Europe is impossible: change the terms of EU migration, while maintaining existing terms with the single market. This is the approach underpinned by the Trade Union movement.

Labour calculates that its core voters were given the opportunity to vote for Theresa May's take on Brexit and, in all but five constituencies, rejected it. There aren't that many votes lost in ending the jurisdiction of the ECJ and replacing it with, for example, the Efta Court. Indeed although sufficient Remain voters accept that Brexit should happen, there are clear majorities in most polls for Britain staying in the single market and customs union, and clearly so in a transition period.

Labour consolidated Remain voters over the course of the election campaign, despite being rather vague on its plans. Constructive vagueness worked electorally.

Even more intriguing, and perhaps surprising, is Labour's approach has led to 'Business Britain' flying to its doors. Already, shadow chancellor John McDonnell is known to have had meetings with CEOs of some of Britain's biggest multinationals. Strange times make for strange bedfellows. A soft Brexit coalition of corporate and Corbyn Britain. Whatever next?

Yet the big surprise over the summer has been the lack of Tory Brexiteer backlash. In a moment of weakness I pressed one of the original Maastricht rebels as to whether, when push comes to shove, they would accept a less pure form of Brexit rather than risk a backlash and no Brexit. We appear to be at that point. The election has caused the Tory Brexiteers to cash in their chips, to bank their considerable gains, and accept that some Brexit is better than risking no Brexit, or a Labour Brexit.

That delicate equilibrium could change, of course. If the Brexit bill is perceived to be too high; if a Cabinet minister resigns in protest. But the Chancellor's argument that his paced, methodical, and smooth strategy for delivering a smooth Brexit is the best way of ensuring EU withdrawal, appears to have won through. For now.

Much will remain unclear over the next few weeks. But there is a significant amount of hope in Cabinet that the German elections will result in a more business friendly coalition in Berlin which will reign the EU Commission in. The reality of the respective strength of the negotiating hands should become demonstrably clear by Christmas.

'This is impossible': Brexit talks

If you hold the best hand, indeed if you "hold all the aces", then by definition, you can not be "blackmailed" as Liam Fox suggested on the PM's recent Japan trip. You simply play your high value cards, and clean up.

If only Brexit really was a game of poker. Whatever the hand Britain had been dealt, it could end up as winner with a strategic and credible bluff.

This isn't anything like poker. In poker your hand is secret, in Brexit the hands are abundantly clear to all. They are called official statistics. In fact this is no conventional card game at all. The card you think you have can start to change depending on how you play it. Above all, the main aim of this game is not about creating one single winner, it is about avoiding a situation where everybody loses. With Brexit you are playing five such games simultaneously, the main one with Europe, another with the Cabinet, another with Parliament, yet another with the electorate, and with the animal spirits of British business.

If the point of the election was to bolster the Big Bluff, as the PM asked voters to "strengthen her Brexit hand", it failed. And even if Theresa May did not fail because of her approach to Brexit, European capitals perceive that she did.

The only game is a strategy aimed at guiding both sides to the point of mutual self interest, where losses are minimised.

'Labour would seek single market access'

No European prime minister or president is even going to lose an election because of Michel Barnier's Brexit negotiations. Botched Brexit positioning could not just lose an election for Britain's two main parliament parties. It could still conceivably destroy either - or both.

Yet a lack of negotiating power, if it transpires as it is appearing to, need not result in an economic calamity. What it does do, however, is limit the time and likelihood for a bespoke Brexit solution for Britain. With a greater mandate and with more time, perhaps a more UK-specific solution would be forthcoming. As it happens it seems likely that for the transition at first, perhaps even for longer, the European Council will suggest an off the shelf version of the arrangements suggested in the UK partnership papers. They aren't that far off. A dressed-up near-Norway solution. Perhaps "Norway in drag".

Could that be sold back to Tory Brexit backbenchers? The real question is whether that would be easier to get through Parliament than WTO terms after a 'No Deal' outcome. They have been quiet so far. The PM herself has dismissed staying in the single market as "not leaving the EU". She has, however, been known to change her mind on important matters in the past 12 months.

Certainly the public squabbling over the divorce bill between the EU's chief negotiator Michel Barnier and David Davis, belies a far more business-like discussion between top officials on the options that really matter - the jurisdiction of common standards between the UK and the EU after Brexit. There was an intriguing silence from Brussels on the UK paper on law and governance. Insiders suggest that the Brussels plans for a transition to this near-Norway long term state consist of two files - the European Economic Area, and a photocopy of the EEA agreement given a different name.

The control "taken back" by Brexit will hinge on the difference between supranationally enforced regulatory harmonisation in which Britain plays a part, and voluntarily happening to decide that the UK will mimic the exact same regulations as the EU, after it has decided them without UK input. As one Sir Humphrey has put it: "There's a difference between regulatory outcome equivalence and harmonisation". Broadly put, this will return some control in those sectors which are basically not traded, but it will be less "control" in sectors which are conditioned by pan-European regulations and freedoms - pharmaceuticals, nuclear trade, advanced manufacturing, banking and insurance. Brexit trades freedom for hairdressing, cleaning and retailing, for less influence over the relevant regional rules in more lucrative industries. For example, already the UK has indicated a wish, on behalf of its tech industry, to be accorded "enhanced adequacy" status as regards EU data regulations crucial for multinationals.

The prize, at some point will be new trade deals, negotiated by this Government. Cabinet insiders are starting to distinguish between negotiating trade deals, signing deals, and actually implementing them. Implementation will not happen during the transition period. Even signing them might be difficult, mainly because the other trade partners will want a final status EU-UK agreement to work with or around.

Farage: next few months 'very big' for brexit

So this leaves Theresa May a prisoner not of her Brexit rebels but to Parliamentary arithmetic and the reality of her negotiating hand, and under strong pressure from business interests to sort things out quickly. Her Cabinet allies point out that it is not just Tory MPs who do not want another election but SNP MPs too, they calculate, would fear a further loss of seats, and not vote for an early election as required under the Fixed Term Parliament Act (plans to scrap this appear to have been mysteriously parked).

"Rigid but fragile" is how one ally describes her position. It just so happens that she is going in to a delicate five way negotiation with a plethora of tests of fragility. Battling for Britain against intransigent Brussels apparatchiks, even a walkout, might be just the sort of job to help regain her domestic political strength. But the election shows that half the country, including important supporters of the Conservatives, would be highly unlikely to buy that. Nor would some of her own MPs.

The roots of the political problem posed by Brexit is that never before on this scale has a decision of half an electorate resulted in the diminution of rights enjoyed by the other half. Governments with larger majorities can have existential crises arise from policies that affect a few tens of thousands of people.

It is a task that would strain a leader with a massive majority, let alone one who had to acquire one from the DUP. Ahead of the most fascinating ever set of political conferences, with negotiations continuing in Brussels, and two set piece summits, nothing should be ruled out.

Sky Views is a series of comment pieces by Sky News editors and correspondents, published every morning.

Previously on Sky Views: Adam Boulton - Beware of overseas trips, Mrs May