It is apt that voting in the Labour leadership contest has coincided with the start of Brexit trade negotiations. Both, inextricably, will determine when – or if – we see another Labour government.

Like every other task for the party’s next leader, devising a policy on Brexit feels dangerous, and potentially unrewarding. Labour could widely misjudge the public mood, or appear to be in denial that it lost, or even look like a party of remain that wants to frustrate the process altogether.

So here is the most important thing: Labour must abandon that fear, and fast. We have left the EU and there is no current movement to rejoin. Labour must reassure leavers of that at every opportunity. Remainers will not hold it against them. Indeed, leavers and remainers can unite on at least one point: everyone expects the opposition to carry out its basic function of challenging the government.

It is irrelevant whether the new leader wanted Brexit. Brexit has happened. That may be devastating, but it brings certainty – and it is this which opens up the political terrain for Labour to act with confidence where before it could only triangulate. In effect, the new leader must advocate what many remainers were proposing for two years after the referendum: the compromise position of a soft Brexit in the single market and customs union, or the maximum harmonisation that comes just short of it. That will preserve the frictionless trade with our largest partner and still allow bilateral deals with other countries across a range of sectors. It will also keep the Irish Sea free of intra-UK goods checks. Leaving the EU does not require us to give up on our economy. We cannot wind the clock back to 1973, and should not want to even if we could.

Labour needs to champion its pro-European, pro-worker credentials and communicate that they are one and the same. As the government gaslights us ever closer to the no-deal catastrophe it brands “an Australia outcome”, Labour must remind voters that the leave campaign insisted we would be part of a “European free trade zone from Iceland” – in the single market – “to the Russian border”. Only Labour would deliver the Brexit people were promised.

The government’s lurch to the extremes is actually making Labour’s job easier. Ministers disregard the wishes of business, the demands of our globalised economy and the needs of ordinary workers. The old promises of the “exact same benefits”, reduced red tape and increased prosperity stand out in our present reality like relics from a lost civilisation. The government is out of control; Labour can wrest it back from them.

The real risk for Labour is that it learns the wrong lessons from its general election drubbing. First, the promise of a second referendum did not cause the defeat. Both remainers and leavers had abandoned the party before that policy – and it was only the promise of a referendum that brought remainers back. Second, the majority in December did not want to “get Brexit done”. Over 52% of voters backed parties in favour of either a second referendum or remaining outright. British politics now offers a wide, fertile space for a party that seeks to appeal both to remainers and soft leavers. If Labour does not occupy it, its opponents on the left and centre will. Once again, Labour will be squeezed on both sides of the country’s new divide and win the support of neither.

But the issue is even more fundamental than that. Although Brexiters have successfully recast democratic opposition as opposition to democracy, the general public does not, as a rule, expect a losing party to abandon its principles or merge with the winners. Labour can never and will never out-Brexit the Tories. If voters want economic and xenophobic nationalism in 2024, they will vote for the real thing, not an ersatz version masked by a red rosette.

Labour’s opposition must not just be rooted in strong principle, but basic politics. If Brexit goes wrong – which the evidence suggests it will – then an opposition that has meekly acquiesced to it will share the blame. This is Labour’s chance to show itself as the party of moderation and maturity. For years, and to devastating effect, the Tories have charged their opponents with economic incompetence and recklessness. That attack may ring more hollow once Boris Johnson has driven the economy over a cliff – but Labour must demonstrate its economic rationality beforehand.

When it comes to it, Brexit is existential for Labour. The government is refusing to defend our key supply chains, refusing to defend the services sector, refusing to defend car manufacturers, scientists or farmers. The Tories said they cared about our prosperity, but have shown they do not. Labour must. This party exists to defend not delusions of empire or fantasies about sovereignty, but real jobs, real industries and real communities.

• Jonathan Lis is deputy director of the thinktank British Influence