Former home secretary David Blunkett has called on trades unions and the grassroots Labour movement Momentum to insist that Jeremy Corbyn sack his closest advisers in order to save the party from collapse.

The extraordinary demand from the Labour grandee reflects frustration across the party at its performance in the European elections as well as anger over its handling of antisemitism, and the controversial decision last week to expel Alastair Campbell.

Corbyn and his team are braced for stormy meetings of the parliamentary party and the shadow cabinet this week, after Labour lost half its MEPs in the European elections, as it supporters deserted, mainly to parties that explicitly backed a second vote on Brexit and staying in the EU.

Writing in the Observer, Blunkett says Labour is “imploding” because of its confused stance on Europe, and needs to act fast to clarify its position and stamp out what he calls “incompetence” at the top.

“Together with Jeremy Corbyn himself, Seumas Milne [his director of strategy], Karie Murphy [chief of staff] and the leader of Unite, Len McCluskey, must surely be held to account for the direction Labour has taken,” Blunkett says. He adds that there is “not going to be an attempted coup against Corbyn so there has to be a very different approach to saving the party and the chance of defeating this shambles of a Conservative government”.

Blunkett says: “In my view there are two forces within the Labour movement – the unions and Momentum – who must now act to get rid of those key advisers who are a block on policy changes and who are responsible for the incompetence we are seeing.

“The major unions have historically played a key role in the stability of the Labour party, taking difficult and sometimes painful action when failure had to be dealt with. This is such a moment.”

A Labour source said: “This attack should be seen for what it is, an attempt to weaken and undermine Jeremy Corbyn by people who know they are unable to oust him and are prepared to damage the Labour party in the process.”

The backlash over the European elections continued on Saturday night as the party’s longest-serving MEP, David Martin, who lost his seat in Scotland, leaving Labour with no Scottish MEPs, said Corbyn should either change policy on Brexit and make Labour an unequivocally Remain party, or consider quitting.

Martin told the Observer that unless Corbyn ordered the change, which he and his inner circle had so far resisted, Labour would be “wiped out in Scotland and in other parts of the country”. Martin, who also served for 15 years as a vice-president of the European parliament, added: “If Jeremy Corbyn is not prepared to make this change he should his consider his position. The buck stops with the leader.”

Milne and Murphy are said by senior figures within the party to be shaping Corbyn’s thinking on Brexit and preventing him from coming out explicitly and unconditionally in favour of a second referendum, and remaining in the EU. Last week there was a furious backlash against what one shadow cabinet member called the “bureaucracy” around Corbyn after the leader’s inner circle decided to expel Campbell from the party for having voted for the Liberal Democrats in the European elections.

Corbyn is expected to face demands to reinstate Campbell both at a meeting of the shadow cabinet and the parliamentary party this week. Several members of the shadow cabinet told the Observer that they will insist upon this, as well as demanding that Corbyn make an urgent statement or major speech without delay to clarify policy on Europe.

The pressure on Corbyn comes before a byelection in Peterborough on Thursday, caused by the conviction of the former Labour MP Fiona Onasanya for lying about a speeding ticket. If Labour fails to retain the seat, it will be seen by MPs as a further sign of the party’s support collapsing.

Blunkett says it is time that Corbyn acted on his promises to listen to members on European policy. “Corbyn has rightly adopted the slogan ‘The many not the few’, but steadfastly refuses to listen to the many and listens only to the few. Certainly not MPs, the vast majority of whom want a confirmatory people’s vote with the option of staying in. Certainly not the members, who want the same and who want to see leadership not acquiescence on Brexit.”

During a visit to Peterborough on Saturday Corbyn said his party’s byelection campaign was focused on “core Labour values”, with environmental protection and ending austerity being the key issues.

The constituency has historically been a close-run battle between Labour and the Conservatives, but Nigel Farage’s Brexit party is attempting to gain a foothold in Westminster and is the bookmakers’ favourite.

In a poll the Brexit Party is in first place in front of Labour in the latest poll. Photograph: Danny Lawson/PA

In the latest Opinium/Observer poll published on Sunday, the Brexit party has surged into first place, overtaking Labour. It is the first time the party has achieved top position in a national poll. The Brexit party is on 26% with Labour on 22%, the Tories on 17%, and the Lib Dems on 16%. When Labour supporters were asked what they wanted their party’s policy on Europe to be, 65% said they either wanted a second referendum or to Remain, with only 17% wanting either a soft Brexit or a hard Brexit.

Adam Drummond, of Opinium, said: “All of the big winners from the European elections have seen some sort of a boost, with the Brexit party adding another two points to move into first place while Labour have fallen back significantly, losing seven points. While the Lib Dems have experienced a boost, the under-reported story from the elections and since then has been the Greens, who have gained eight points since our last poll.

“While the Brexit party and the Lib Dems have been taking votes from Leavers and Remainers respectively, the Greens are unique in taking votes from both sides of the Brexit divide.

“While the usual caveats should apply about how much to read into Westminster voting intention polls given the proximity to the European elections, the fact is that we might be less than six months out from a general election, so these might become relevant very quickly.”