If I'm understanding correctly, they're not turning on some other tracking prevention when you enable this "feature". It's strictly a privacy downgrade.
This is a good example of anticompetitive/anti-monopoly regulation not only not protecting consumers, but in fact making things actively worse.
A better regulatory response would have been "having an advertising/analytics product and a browser product in one company is anticompetitive, split one of them into a separate business from the other, and then the browser product must not privilege the advertising/analytics product". Then the browser could, in fact, just disable third-party cookies without giving advertisers and analytics companies another alternative.
Of course they can. They just don’t want to.
Google isn't allowed to stop others tracking you without also removing their own ability to track you because that's anti-competitive.
So, what did the regulators actually say, and does it in fact allow Google to turn off third-party cookies without any replacement? If it does, then this is Google's fault for adding this feature in Chrome. If it doesn't, then this is the fault of bad regulation.
So if they are rolling out a UK mandated feature globally there is no question that Google is all for it.
In any case, this is still strictly a privacy downgrade to turn on. It's still deceptive to imply turning it on improves privacy.