Some thought it was inevitable despite strong pressure on the Prime Minister by Fox's supporters in the House of Commons to keep him in post. The inevitable has happened and the BBC reports that Fox has now resigned. So much for my earlier advice. My money is that -- in the reshuffle we will see shortly -- Fox will be replaced by Transport Secretary Philip Hammond.
I'd also be unsurprised to see Kenneth Clarke and David Willetts in different positions.
UPDATE: Hammond has now been confirmed as the new Defence Secretary.