Lets get a substantial amount of level 2 before we attempt to even try level 3 moving block.... level 2 gets rid of lineside signals anyway.
Potentially very effective at controlling costs on busy wide railways approaching major cities where signal gantries spanning multiple tracks are the only way of ensuring adequate long range sighting, and are extraordinarily expensive. Where small numbers of signals are concerned with long blocks on more rural lines the savings are probably far smaller, as integrated lightweight simple straight post signals are fairly cheap, easy to install and largely maintenance free today.
I mean, when there's no L3 implementation yet it seems a bit advance to suggest it.Also, L2 can have lineside signals as an overlay (Thameslink does this, for example), though obviously this reduces capacity (as you have longer blocks as you're ultimately speed limited by four-aspect signalling).
Importantly on Thameslink they only reduce capacity for the trains that actually use them instead of ETCS. If a train spontaneously loses ETCS/ATO functionality part way through the core, it can be driven out manually under signals in the normal direction as the quickest way to keep traffic flowing. By the time the changeover decision is agreed and made, the train in front will be long gone so the decreased capacity following it will likely not be a problem. If the next train following is ETCS active it will be able to follow the manual train as closely as normal so the service can start to recover. At quiet times off peak a few non-ETCS trains can be scheduled through the core if desired.
As far as I'm aware there has been a requirement in TSI for years now that provisions for easy ETCS installation need to be made in any new stock. Precisely with the idea in mind that retrofitting should be quite straightforward. I don't know exactly when this was introduced but I would expect the 387 to be more recent than that requirement.
387s are definitely 'ETCS ready' This is one reason why they have also been selected for Heathrow Express services. They apparently have the same generation of train management system as Elizabeth Line class 345s from Bombardier, and although they are not currently equipped with the DMI control screen, where and how to fit this has been considered in the cab design.
Of course it would be a monumentally stupid thing to diverge from the existing standard. It would dramatically increase cost as you lose the chance to buy off-the-shelf equipment. That said, this country is no stranger to taking monumentally stupid decisions just to be slightly different...
As for Brexit, I don't think that should have anything to do with ETCS. Countries such as Australia, Libya, Indonesia, Israel or New Zeeland would never even be an accepted candidate for EU membership and yet have introduced ETCS. They chose ETCS because it makes technical and financial sense, nothing to do with politics or EU membership. The only impacts that Brexit may have on ETCS rollout in the UK is that the legal requirement to use ETCS for new routes would not apply any more and that there is no longer EU funding to retrofit stock or routes with ETCS.
The latest train management systems from all manufacturers are effectively designed to be 'natively' ETCS, supporting legacy warning systems like TPWS by emulation in the ETCS computer, with extra plug-in modules as required. While going against the tide would be 'monumentally stupid' as you suggest that doesn't mean UK couldn't design a custom system to replace AWS/TPWS, for instance, on lightly used lines as long as it employs ETCS components and message protocols. The ideas behind ETCS are really a long standing UIC technical project to promote interoperability and common standards rather than the brainchild of the EU, which nevertheless enthusistically adopted and funded development, as it coincided with their wider political and economic aims. Prior to this, most European railways were locked in to their own unique legacy protection systems and often monopoly suppliers of that kit who could effectively charge what they liked and imposed their own own large scale upgrade requirements when they decided unilaterally to stop supporting a particular system. As well as train builders, all signalling manufacturers are now skilled up to deliver ETCS-based systems today. There is simply no other viable show in town.
