When she became prime minister in 2016, Theresa May gave the impression of knowing exactly what kind of Brexit she wanted. In speeches and interviews, she made clear that Brexit was about breaking with the EU in line with the referendum, taking control of national borders, leaving European institutions including the court of justice, becoming a global free trader and, almost as an afterthought, remaining good neighbours with Europe. To the domestic audience she insisted that the essential message of the referendum was about migration control, and she implied that, though there might be economic blips along the way, she had the leadership skills to persuade the country that the gain was worth the pain.

That strategy now looks very threadbare. Parts are in tatters. Others have been turned on their heads. The underlying problem for Mrs May and her government is that the fantasy of 2016 is running ever harder and more often into the reality of 2017. The reality is that the impact of Brexit on jobs, living standards and the economy is proving much more severe and much more fundamental that she had hoped in the early months of her premiership. The reality is that “global Britain” is a delusion cooked up by the Tory party’s obsessive anti-Europeans. The reality is that the UK’s post-Brexit relationship to the EU, its single market and its customs union is far more consequential than anything else on her agenda. The reality is that Mrs May threw away her authority in June, and that public opinion is losing confidence in the Brexit vision she promoted a year ago.

The signs are that Mrs May and the chancellor, Philip Hammond, actually get much of this, and that they are ahead of parts of the Tory party in doing so. Mrs May’s hastily arranged dinner date with the EU commission president and his chief Brexit negotiator in Brussels on Monday has conventionally been presented as a last-ditch effort to force an inflexible Brussels hierarchy to open up the stalled talks process in advance of this week’s EU leaders’ summit. Monday’s meeting predictably failed to move the dial on the talks. But that is only part of what it was about.

In the most immediate sense, the talks are stalled about money. Many observers expect that to continue. But it is not the main issue, however much the Tory right and the anti-EU press may huff and puff about it. In the larger picture, Mrs May’s intensive personal diplomacy only makes sense as an extension of September’s Florence speech, in which she cautiously committed the government to a transitional approach to Brexit, and by implication to a more convergent post-Brexit association with the single market and the customs union than she has yet had the confidence to admit, especially to the parts of her party that increasingly crave a year zero breach with the EU.

Most of the reasons why Mrs May needs a deal with the EU more than she once pretended are economic. New inflation figures, the highest for five years, show that the economic skies are darkening. That reflects the fall in the pound caused by Brexit, and inflation is likely to rise, as the governor of the Bank of England said on Tuesday. Real wages are falling and will fall further. Debt is rising ominously. The tax take is declining, with major implications for the budget. Businesses are on the threshold of making investment decisions that, unless the mood changes, may weaken the UK economy still further. The financial sector is clamouring for a soft Brexit. Today the Resolution Foundation said families face a £260-a-year hit. David Davis’s response that this fails to take account of potential free trade deals suggests he is in denial. His pretence that no deal is an acceptable outcome would be laughable if it were not so tragic.

Britain is not yet at the point at which the abandonment of Brexit, in defiance of the lamentable 2016 result, would be politically sustainable. But events may be moving gradually in that direction. Many who voted leave still say, as Mrs May herself once believed, that economic pain is a price worth paying for sovereignty gain. But Mrs May and Mr Hammond clearly have their doubts now, and rightly so. Public opinion may be starting to shift against Brexit a bit too, though not enough yet to rely on. Much depends on whether Mrs May is prepared to lead Britain into “the closest economic relationship possible” with the EU, as the OECD put it today; in effect a bespoke UK version of the Norwegian deal. If she is unable or unwilling to do that, Mrs May risks facing yet another reality – a politically terminal one.