Apple is in a really tough position. I don't know if there's any way they could fulfil the original request without it effectively becoming a backdoor. Disabling E2E for the UK market is just kicking the can down the road.
Even simply developing a tool to coerce users out of E2E without their explicit consent to comply with local laws could be abused in the future to obtain E2E messages with a warrant on different countries.
A very difficult position to be in.