Brexit often feels like two passengers furiously arguing over the destination of someone else’s car. While the government and parliament’s rows about meaningful votes and customs relationships are significant – not least for the British constitution – they distort Brexit’s bigger picture. This car is being driven not in London but in Brussels. Next week’s EU summit has received much less attention than the government’s torturous withdrawal bill, but it could produce a far greater impact.

The summit is crucial for two key reasons. First, it will determine the tone, backdrop and workload for the final months of Brexit negotiations. Despite the government’s overt ill-preparedness and frantic disarray, our withdrawal must technically be wrapped up in time for October’s European council meeting. Whatever is not agreed now must be agreed then. This leaves just 17 weeks of negotiating time, which include the arid weeks of August. A set of negative conclusions this month would represent the worst possible start.

Second, and more importantly, this European council meeting represents the last opportunity for all parties to take stock of the situation, and if necessary change course. As at the December summit, the UK’s fate will depend on how seriously it takes the concerns of Ireland.

Senior figures in Brussels and Dublin have spelt out the consequences of not resolving the border issue. Last month, the Irish taoiseach, Leo Varadkar, suggested that a lack of progress at this summit could precipitate a no-deal cliff-edge. That is not brinkmanship. Officials privately fret that the UK government remains in stubborn denial about the consequences of its decisions, and that after the summer it could find itself at the edge of the abyss by accident. Many observers additionally fear that businesses and EU citizens will see the writing on the wall before Theresa May, and trigger an economic shock that she will struggle to prevent or contain.

The omens for a successful summit are not good. Yesterday, the EU and UK published a joint statement which outlined some progress on issues such as VAT, but no substantive developments at all on Northern Ireland. Key to this is the “backstop”, which ensures an open Irish border in all circumstances and for all time. Following the UK-EU agreement in December, the EU proposed that, as a last resort, Northern Ireland would remain permanently in both the customs union and single market for goods. The UK’s belated counter-proposal seeks to time-limit that and ignores the single market altogether – both of which make it unacceptable to the EU. The UK still has a week to revise its offer, but Irish ministers have openly expressed their pessimism.

‘Irish taoiseach Leo Varadkar suggested a lack of progress at this summit could precipitate a no-deal cliff-edge.’ Photograph: Laura Hutton/PA

The backstop remains Brexit’s unsquareable circle. The UK will not accept a bespoke agreement for Northern Ireland because that creates a regulatory border in the Irish Sea. But the EU will not accept a UK-wide backstop as it considers that a cherry-picking of the single market. Northern Ireland can stay in just the single market for goods in order to preserve the Good Friday agreement, but the UK cannot be entitled to the same benefit. If the government wishes to implement the free movement of goods, it must also implement the free movement of people.

The UK government’s fundamental choice is thus clear. Either it opts to stay in the whole single market and whole customs union, or it divides its internal market. If it chooses to leave the EU’s customs union as well as the single market, goods travelling to Northern Ireland from Great Britain will face checks not only on regulations but also on tariffs.

The EU’s chief negotiator, Michel Barnier, recently discussed a sea border as both a realistic prospect and the necessary consequence of the government’s red lines. The government still refuses to take the threat seriously. May will almost certainly fall if she attempts either a sea border or soft Brexit, which is why she will strenuously attempt to avoid both. But while she can defer her confrontation with reality, she cannot escape it. Those are her options, and that is her problem.

The government was driving the car until the moment it triggered article 50, and then it handed the keys to the EU. In reality, the vehicle contains not two passengers but 65 million British people. The government’s only power is to divert it from the cliff-edge or stop it altogether. Every day it declines to do so, the car hurtles towards a destination that none of us requested, and which will punish us all.

• Jonathan Lis is deputy director of the thinktank British Influence