I don't think it ever was an option. There is already a second tier with EEA/EFTA. But how could another variety look like without undermining the Single Market?
Keeping that in mind, I would credit HMG for at least acknowledging it even though they don't know how to apply it. There is still a somewhat British illusion that SM entails just goods and services, maybe capital at best.
There are four freedoms. Taking CH as an exception is also misleading given that they have hundreds of agreements (they are not part of a partial SM) and need to acknowledge FoM.
And: they don't challenge EU's superiority over defining what is SM compatible and what not AND they are generally less problematic than UK.
Also Jersey etc is a really bad reference point. It's small island, the "breach" of SM integrity is very little if it is noticeable at all. UK with 60.000.000 ppl is a completely different story.
Also Ukraine is a weird referencing point. They need to align heavily but they are still not in SM and there would be need for borders if they would decide to have a CU with EU.
Besides, it was EU which rejected FoM, as long as EU defines and all members agree on this definition on their own it is not undermining SM. (besides l, the obvious point that Ukraine is less developed than any of the member states).
Also the reference that SM on services is far less developed and indivisibility wouldn't therefore make sense: it might be less integrated than the other tiers but still far more than any other area around the world.
Last but not least: a unspoken red line is, that at any cost must be avoided that HMG leaves level playing field on regulations to outright the costs of losing a prime access. It's something basic: leaving SM must not be allowed to become an economic advantage.
So how can such a multi tier look reasonably different than now AND addressing all those requirements?
