We don't want it the other way around; companies placed outside the borders doing and selling whatever they want without a care. So we end up in a negotiation.
Apple choose to maliciously comply; subtly revealing the TCN, giving all UK users notices about what their government demanded of them to encourage public outrage, and push on the correct parts of the UK government that has their interest in mind.
They can do both of things. There's no law against leaving a country for not respecting human rights like privacy and encryption.
No, but there is a cost.
It may actually be illegal in US law for Apple to leave the UK market for ideological reasons. Public companies are beholden to shareholders and can be sued for not acting in their interest (fiduciary duty, Delaware General Corporation Law). (I loathe these laws, but that's a separate discussion entirely.)
So sure they _can_, but at a cost that strikes the option from the cards entirely.
PS: If you think the British gov is authoritarian.. well, you might not know what the term means and/or anything about the spectrum of governments operating today or in the past.
The British government is certainly not as authoritarian as those in China or Russia, but that doesn’t change the fact that it’s still terrible and restricts people’s rights. For example, you can be detained for as long as they want if you refuse to unlock your encrypted device.
Supose you live in USA, your chickens have a list of laws, those laws apply to USA. If you try to sell those chickens in UK or Europe you'll find that your company will not be allowed to operate, and if you continue someone will go to jail.
Maybe digital products have an easy way out, but apple is not digital and they may need to find a way to comply.
Can Apple afford to lose the UK market? Almost certainly yes -- it's a fairly minor global player. Can the current UK government afford to deal with the massive fallout of banning all Apple products right now? That might be, as Sir Humphrey Appleby would say, a very courageous move.
In other words, Apple could simply state that in order to protect their users they cannot and will not do this, and will withdraw from the market rather than comply. That puts the onus on the UK government to either put up or shut up.
It would be fascinating to see how this would play out. Would "think of the children" and "OMG, terrorists!!" win against, "but I still want my iProducts"?