Brexit isn’t working. We were sold a false prospectus. Businesses, especially small and medium-size ones, are reeling. They are absorbing unwanted costs; paying hidden tariffs; suffering hitherto avoidable checks on exports; moving factories, depots and offices to within the EU; shedding workers and haemorrhaging orders. Children’s school trips to and from Europe have collapsed. It takes months to get a visa. British science remains outside the EU’s Horizon programme, the biggest international science programme in the world. So it goes on. As importantly, centuries of British statecraft, aimed at building alliances in Europe with whatever constellation of countries best suited our interests, has been shattered. Britain’s leaders, from Pitt and Palmerston to Churchill, all understood the vital need to engage with Europe. Now, Ireland’s taoiseach, Micheál Martin, or France’s president, Emmanuel Macron, are vastly strengthened, securely knowing they have the entire EU behind them. Whether attempting to solve the cross-Channel migrant crisis or trying to join Horizon, bellicose jingoism is not only crass – it has no hope of achieving the results we want. Britain is suddenly diminished even if our Brexit leaders have yet to realise how little Britain has become. These realities can’t be disguised for much longer. The Brexit minister, David Frost, felt the need at last week’s one-day Margaret Thatcher conference on trade to argue that success, clearly elusive, would need Britain to overcome “the forces of entropy, of laziness, of vested interest”, his blather signifying desperation and beleaguerment. The “vested interests” are no more than businesses bewildered by rising costs and diminished opportunity. The Spectator’s editor, Fraser Nelson, who had earlier chaired a debate between Vince Cable and veteran Brexiter Daniel Hannan, admitted in a Telegraph column entitled “Was I right to support Brexit?” that he found himself challenging Hannan more than Cable. Where were the sunlit uplands we were promised? From Global Britain to unleashed freedom to “liberalise, innovate and grow” the Brexit project was sinking. Even Keir Starmer at last felt emboldened at the CBI conference to begin to exploit such fertile ground; Labour had a plan to make Brexit work, which the government evidently hadn’t, he argued. It is tiptoeing round the edges. The heart of the problem is that the government has become so entrenched on all matters European, and consequently so absolutist about sovereignty, that it has trapped itself into successive self-defeating positions. In an important assessment of the EU-UK Trade and Cooperation Agreement (TCA) – the vaunted “deal” – Cambridge academics Catherine Barnard and Emilija Leinarte observe that as far as trade in goods is concerned (the agreement is so 19th century it virtually ignores services), the TCA is essentially no more than minimalist World Trade Organization (WTO) terms, even organised into WTO chapter headings. Aside from the Northern Ireland protocol, it has no traces of the single market, nor any of the potential infringements of “sovereignty” that adjudicating it might entail. Thus all the problems. Of course there are troublesome, expensive sanitary checks on exports from live shellfish to crisps with cheese flavouring as there are for any exporter outside the EU’s single market. Lord Frost is plainly in ignorance, but officials have floated proposals for British-only regulation and safety certification of industries as various as chemicals and construction. But the industries argue it is economically stupid: for example, the chemical industry asks why pay for any distinct British registration and certification for dangerous chemicals when it already pays for the EU gold standard under which it will produce anyway? Why not simply accept EU certification? Britain’s financial services industry is increasingly concerned. The TCA offers no provisions for banks to sell their services within the EU; last week, the EU signalled it wants any bank business in Europe to be backed by appropriate capital, essentially ending cross-selling from London. Bankers are not stampeding out of Britain, but the numbers are growing steadily. London’s financial markets currently equal New York’s in their depth and liquidity; every bank that moves part of its business to the EU weakens that depth. Cumulatively it adds up. In the first six months of this year, exports to the EU were down 13.1%, imports down 24.8%, according to Channel 4’s Dispatches. Our children and young people are losers too: no chance to study in the Erasmus programme or work in the EU’s hospitality and leisure industries. Equally, the 45,000 EU au pairs or some 750,000 EU schoolchildren who used to come to Britain every year are disappearing, deterred by onerous passport and immigration rules. The Home Office told FT reporter Peter Foster in response to his EU school trip report that it welcomed cultural exchanges with “other nations”, so neuralgic about Europe that it could not utter “EU”. After the US’s brutal unilateral exit from Afghanistan, it is obvious that the UK needs to have a European dimension for our defence; it’s the same story on cybersecurity or international crime. Everything is palsied by the fetishisation of sovereignty, the prickly posturing it induces and the absurd proposition that Australia and Mexico are as near and as important to us as France and Germany. Britain has to engage with the continent of which it is part. It is to find practical ways of doing just that in the here and now – fixing a broken Brexit – that an independent commission on UK-EU relations is launching tomorrow. (Full declaration: I am a member.) The prosperity and even the security of our country are menaced; there needs to be a coming together around feasible plans for better deals on mobility, on product safety and standards, on trade in services, on security and much else. What must not happen is for us to dig deeper into the hole we are already in. Will Hutton is an Observer columnist