Tory hopes of uniting the party behind Theresa May’s latest vision for Brexit faded as former deputy prime minister Michael Heseltine dismissed her latest speech as just more “phrases, generalisations and platitudes” which had done nothing to make a deal more likely.

While most Conservative MPs and peers gave the prime minister a period of grace after Friday’s address, Heseltine said all May had done was offer more detail on a set of demands that the European Union had made clear all along it would never agree to.

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Talking to the Observer, he said: “The speech just moves us further down the cherry-picking road. It set out the cherries that Britain wants to pick but that approach completely ignores the fact that the EU has said, ‘sorry there is no cherry picking’.”

He added: “Why is it that after 18 months since the referendum we have not got any closer with these issues? The answer is simple: because no one has got any answer about how to do it.”

He said the huge gulf between what May was asking for and what the EU would be prepared to give was as wide, if not wider, than ever, leaving UK businesses in despair, and with no option but to consider postponing investment, or placing their money and plans elsewhere.

“While that gap remains industry will continue to make assumptions that will involve moving investment from here to the continent,” he said.

We've gone from the fastest growing to the slowest growing economy in Europe and made a Horlicks of the Irish border

A lifelong europhile, Heseltine conceded that the prime minister was in a difficult position, as rightwing Tory MPs held “a knife to her throat”.

But neither the prime minister nor her cabinet had made any progress on the central Brexit problems, including the Irish border, because such issues were essentially not solvable unless the UK stayed in the EU.

The only way forward, he said, was for the issues to be put back to parliament, and then to an election or referendum. “The downsides are becoming more evident as time passes. We have had a serious devaluation of the currency. We have turned ourselves from the fastest growing to the slowest growing economy in Europe and we have made a complete Horlicks of the Irish border. I am totally with the view of Tony Blair and John Major that this matter has got to go back to parliament and possibly to a referendum or a general election.”

May will defend her speech on the BBC’s Andrew Marr Show on Sunday, saying it offered “a vision that was ambitious” but “practically based and therefore credible”. On Monday she is expected to make a statement to parliament on the latest UK approaches to the Brexit negotiations.

But while the speech has bought her time, there is no sign that her troubles are easing either with her own party in parliament or with Brussels. On Tuesday, the EU will publish draft guidelines for a post-Brexit trade deal that are likely to reject many of the positions outlined in May’s speech.

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“It is good to hear that the UK wants to stay in regulatory alignment but that doesn’t really solve any problems,” said one diplomat involved in drafting the EU’s position. “It doesn’t take us over the line. We are ships passing each other in the night. We are not connecting.”

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Meanwhile, there are no signs that rebel Tory MPs will back off or stop working with Labour colleagues on amendments to the withdrawal bill. Talks have continued between Labour MPs and Conservatives about how to push forward amendments on the customs union, single market, and the date of Brexit, on which May could well be defeated.

There are also signs that worries about Brexit could hit the Tories in May’s local elections. Tory council leaders across the UK are among those who believe Brexit will damage their local economies, putting them under greater pressure to push up council taxes and cut yet more services, according to a new survey of local authority leaders and chief executives.

This found 61% believed Brexit would have a negative or very negative impact on their regions.

The survey by the New Local Government Network (NLGN) showed only 12% of 185 respondents believed it would have a positive effect on their economies, while 26% felt the impact of leaving the EU would be neutral.

It is also uncovered profound dissatisfaction with the level of support and engagement that councils are receiving from central government over Brexit. Only 4% said they were receiving adequate support, while 68% thought it was insufficient.