Early on Wednesday evening a middle-ranking minister stopped on his way to a meeting in the House of Commons and offered the following observations about the government in which he serves. “There is no discipline at all. Everyone thinks they can say just what they want. It is not good for anyone or good for the country.” Crucial decisions on Brexit had to be made within days, and time was running out, he said. But within the cabinet, disagreements were widening as the moment of truth approached. Ministers were briefing against one another in public, giving an impression that the ship of state was heading for the rocks just when the national interest required those steering it to pull together.

“She has to lead,” the minister added. “The can has been kicked into the corner on Brexit. It can’t be kicked any farther.” He then headed off, turning back for a second, to sum it all up as “midsummer madness”.

Normally ministers and senior MPs will show some caution when having private conversations with journalists at Westminster. They will at least make efforts not to be overheard. But these days they brief without fear on every corner, in every cloister. Soon after the minister departed, a former cabinet minister who has worked for the Conservative party for several decades strolled by and was happy to talk. The atmosphere was dreadful, he said, and Theresa May’s position was becoming more perilous by the day.

“I don’t think the [leadership campaign] telephone lines are being installed quite yet, but it’s pretty clear that the endgame is afoot,” he said. “Things are very, very bad indeed. The end of Thatcher doesn’t seem as bad as things feel now. How does it happen? May upsets the Brexiteers, and they bang in the letters [calling for a leadership contest]. People like me will support her because without her all hell will break loose. But the whole thing is on a hair trigger. If she can get through to 23 July, everyone will be going away for their holiday. But it could be a bloody autumn. They are more frightened of David Davis resigning than anything else.”

Westminster is always a hothouse in high summer, in which disagreements and splits within parties seem more important to those inside the bubble than they do for the world outside. Now, arguably, the reverse is the case. Last week’s burst of Tory bloodletting came less than a week after the EU withdrawal bill had passed the last of its big parliamentary hurdles en route to the statute book. But rather than bank that success and move on, as one, to the next, even bigger challenge – agreeing a united negotiating position on what Brexit will actually mean, at an awayday at Chequers this Friday – the cabinet did the reverse. It went into meltdown.

It began last weekend with some of the most senior ministers in May’s team falling out over whether the UK’s biggest businesses had the right to speak up about the risk to jobs from a hard Brexit. What Brexiters fear most is that employment and contracts will go abroad and that this will turn public opinion against a clean break with the EU. The cabinet infighting was triggered by a chilling warning from Airbus that it could leave the UK in the event of a hard Brexit, putting around 14,000 jobs at risk. BMW then gave similar gloomy assessments. The foreign secretary, Boris Johnson, is supposed to have reacted at a private reception by saying, “Fuck business.”

Quick Guide What Boris Johnson said in leaked recording of speech Show Deep divisions in the cabinet over Brexit have been exposed in a secret recording of a speech Boris Johnson gave to the Conservative Way Forward group. Here are his most contentious comments on ... Donald Trump “Imagine Trump doing Brexit. He’d go in bloody hard … There’d be all sorts of breakdowns, all sorts of chaos. Everyone would think he’d gone mad. But actually you might get somewhere. It’s a very, very good thought.” Meltdown over Brexit “You’ve got to face the fact there may now be a meltdown. OK? I don’t want anybody to panic during the meltdown. No panic. Pro bono publico, no bloody panic. It’s going to be all right in the end.” The Treasury “The inner struggle is very, very difficult. The Treasury, which is basically the heart of remain, has seized the risk — what they don’t want is friction at the borders. They don’t want any disruption. So they’re sacrificing all the medium and long-term gains amid fear of short-term disruption. Do you see what I’m saying? “And that fear of short-term disruption has become so huge in people’s minds that they’re turning them all wet. Project Fear is really working on them. They’re terrified of this nonsense. It’s all mumbo jumbo.” EU’s orbit “The risk is that it will not be the [Brexit] we want and the risk is that we will end up in a sort of ante-room of the EU, with an orbit around the EU, in a customs union and to a large extent in the single market. So not really having full freedom on our trade policy, our tariffs schedules, and not having freedom with our regulatory framework either, in the lunar pull of the EU. “What they are trying to do is do a Brexit that does as little change as possible and that keeps us basically in the same orbital pull … and that would be the worst of both worlds.” Photograph: Toby Melville/X90004

So great is his, and the Brexiters’, desire to leave everything to do with the EU that he even seemed prepared to put at risk the Tory party’s close relationship with their friends and donors in business in the name of Brexit purity. It all went downhill from there.

Cabinet unity and collective responsibility crumbled. The health secretary, Jeremy Hunt, went on television to say that it was “entirely inappropriate” for big businesses like Airbus to say such things, only to be contradicted by the business secretary, Greg Clark, who slapped his colleague down, saying “any company and any industry that supports the livelihood of so many working people in this country is entitled to be listened to with respect”. Tory donors in business despaired. Alexander Temerko, who has given hundreds of thousands of pounds to the party, said that May was not suited to be leader. “There is no economic and business agenda,” he argued. “Business will support clarity. All of us, with small exceptions, say we need to be in the customs union and be part of EU regulation. Theresa is a good lady with strong morality, but she doesn’t have political intuition.”

Throughout last week the arguments spiralled like a playground brawl, with everyone piling in, working off their own frustrations, showing they could throw good punches too. Perhaps fearing their time in high office might be limited, ministers appeared to be deliberately raising their profiles while they had the chance. The defence secretary, Gavin Williamson, was seemingly sore that the NHS had received promises of an extra £20bn a year while his department had got nothing. If it did not get the same, some of his people briefed, he could bring May down.

Asked why cabinet anarchy had descended when unity was demanded more than at any time in recent history, a former minister said she could only think it was fear of failure and the human instinct to blame others for impending catastrophe. “A sense of doom seems to have stirred selfish instincts of self-preservation. They all fear we are heading for no deal and disaster. Now it’s every man, every woman for himself and herself. It is about salvaging reputations.”

Levels of farce were reached on Tuesday night when Liz Truss, chief secretary to the Treasury, targeted Michael Gove and other ministers for meddling too much in people’s lives. “Too often we’re hearing about not drinking too much, eating too many doughnuts, drinking from disposable cups through plastic straws, or enjoying the warm glow of our wood-burning Goves … I mean stoves,” she said in a speech at the London School of Economics. “I can see their point: there’s enough hot air and smoke at the environment department already.”

Was she joking? Perhaps, but cabinet ministers would not risk such attempts at humour in normal times. Her comments about doughnuts came just three days after Hunt had announced a long-awaited anti-obesity strategy. Brexit disunity was spreading like a virus across the government’s entire domestic agenda. “Brexit is destroying the party,” said another former minister. “What are we now? Are we pro-business? Are we internationalist? Are we pro- or anti-regulation?”

This Friday the disunited cabinet heads for Chequers, charged with agreeing the content of a white paper that is supposed to contain the vital elements of UK policy on Brexit that can then be negotiated on with Brussels over the next few months. The prime minister is said to want an agreement that would involve staying closely linked to the customs union and single market in goods, though Downing Street insists, to placate Brexiters, that will definitely not mean accepting free movement of workers.

It looks like another unrealistic attempt to square the circle. EU leaders have already made clear they will never accept what they regard as more demands to pick their cherries on departure. And another problem for May is that Johnson and Davis say a customs deal that in any way keeps the UK linked to EU customs rules and institutions will be unacceptable to them. It would be Brexit in Name Only (Bino). The likes of Clark and Hammond, on the other hand, want maximum closeness to the customs union and single market. Cabinet ministers are split many ways. One arch-Eurosceptic in the cabinet told the Observer that in the end they may have to accept temporary membership of the customs union beyond Brexit and the two-year transition, and decouple later. This, the cabinet minister argued, was because Tory Remainers might well win the next round of parliamentary battles over the trade and customs bills and insert pro-customs union amendments into them. The prime minister has decided the meeting will not end until ministers have reached a deal. But no one is betting much on a puff of white smoke rising from the Chequers chimney on Friday night, signalling a truly meaningful deal. Too many “crunch meetings” have been and gone over recent months to allow that kind of optimism to take hold.

There are now only about six weeks of negotiating time left on Brexit, when parliamentary and Brussels holidays and the party conference season are taken into account, before a deal has to be done in October. Any agreement then has to be voted on by the European parliament and by MPs at Westminster before Brexit day on 29 March next year. Without a deal, there will be no two-year transition period, no soft landing, and instead a hard descent into chaos of the kind that businesses say will drive them abroad. Brussels looks on in despair.

After May attended a summit there on Thursday, the prime minister of Belgium, Charles Michel, said: “The feeling that dominates is the impression that the Brits continue to negotiate with the Brits and not with the EU. The red lines set by the UK are globally incompatible with the fundamental principles of the EU.”

More than two years on from the referendum, with time fast running out, and the cabinet unable to agree a negotiating position on issues as fundamental as customs and trade, there seems to be only one thing that everyone in the UK and EU agrees on: the prospects for a good deal for all on Brexit look bleaker than ever.