In a major intervention, the former Prime Minister warned that voters will not find Jeremy Corbyn’s approach to EU withdrawal “credible”.
Mr Blair singled out senior figures in Mr Corbyn’s top team – including his key ally John McDonnell – as having made apparently contradictory remarks on the party’s proposals.
He concluded that if the country does leave, then Labour’s “timidity” will bear responsibility alongside Tory right-wingers who have been pushing for Brexit.
It comes just days after The Independent reported how insiders fear Labour is heading for a “reckoning” – with the party apparently backing Brexit, but many supporters still believing it is opposed.
In a 2,400-word article published on his own website, Mr Blair dissected what he believes is the central contradiction in the Government’s approach – that it is incorrectly suggesting it can have the benefits of the single market without following its rules.
Instead, he predicted the UK will be left with a “patchwork” deal that allows the Conservatives to claim Brexit has been done, but actually means the country follows EU rules without a say in forming them.
Turning his fire on Labour’s approach, he said: “Here Labour has its own ‘cake and eat it’ phrases. The Shadow Chancellor [Mr McDonnell] says we will not be in ‘the’ single market but ‘a’ single market.
“The shadow industry minister [Barry Gardiner] talks of keeping the benefits of the customs union agreements but still being free to negotiate our own trade deals.
“This is confusing terrain on which to fight.”
At the moment, Mr Corbyn says Labour would honour the outcome of the 2016 referendum and take Britain out of the EU, but that the party wants a deal that allows the best possible access to the single market.
While committing to Brexit, the party has launched successful attacks on Theresa May’s withdrawal legislation which have seen the Government lose votes in Parliament.
Branding the approach tactically “mistaken”, Mr Blair said it will mean that once a deal is agreed, Labour’s front bench will only be able to claim they would have negotiated a better one.
He added: “This isn't credible.”
The former leader argued that as his party is failing to oppose Brexit outright, it is missing the opportunity to launch a more meaningful assault on the Conservatives.
He wrote: “Because the Labour Party is saying that we too would do Brexit, we cannot attack its vast distractive impact.
“Labour could mount such a powerful assault on the Government’s record from the appalling state of the NHS to crime … if we were saying to the country: here’s the agenda which could be delivered for the people were not for the fact that all the energies of Government … are devoted to Brexit.
“And, second, it puts us in a vulnerable position when the Government concludes ‘the deal’ some time in 2018.”
He argued the party should fight for people’s right to rethink Brexit, either in a second referendum or an election, but that Labour would only be able to say Conservative divisions on the EU are harming the country, if the party itself opposes withdrawal.
He concluded: “If we do leave Europe, the governing mind will have been that of the Tory right.
“But, if Labour continues to go along with Brexit and insists on leaving the single market, the handmaiden of Brexit will have been the timidity of Labour.”
A Labour spokesman confirmed the party wants a final deal that retains the benefits of the customs union and the single market.
He added: “Labour is flexible as to whether the benefits of the single market are best retained by negotiating a new relationship with the single market or by a bespoke trade deal.”
Earlier this week, senior figures in the party raised concerns with The Independent that polling indicates Labour may suffer a loss of electoral support as the Brexit story unfolds.
In 2017, the British Election Study found Mr Corbyn had picked up extensive support from remain voters at the general election, another poll found rocketing support among students – but with many believing the party opposed Brexit – while a third survey found 66 per cent of people aged 18-24, a major support base for the party, want Brexit stopped.
One member of the Labour front bench said: “It’s fine for now when we are able to say this is just about process.
“But there is going to be a reckoning at some point when the Tories are eating themselves and to capitalise on it electorally Labour has to get its act together and say clearly ‘we are for X’ or ‘we are for Y’.
“To be honest, when it comes to that I’m not sure we can get our act together for the kind of unified position that is going to keep everyone happy.”