The 'hand-fitted Merlins in the UK' story is a myth, long past it's sell date, and despite flag-waving by some American wannabe-journalists. For example, RR tollerannces on Merlin were severe, half of measure of what DB prescribed for their V12 engines. Merlin production in 1940 was in the ballpark of DB 601 and Juom 211 combined, that would not be the case if the Merlins were hand-fitted.
Now for the OP. Shove the Kestrel on the Matilda II, along with suitable gearbox, and use the 3pdr Vickers (about as powerful as the Czech or French 47mm). Forget the cruiser tanks.
Exactly
My Great Aunt (having popped over from the free states) built Merlin's up somewhere near Crewe during the Great 2nd unpleasantness and she had no letters after her name, so not wanting to take anything away from her 'they cannot have been that hard to build' if a young Irish lass with no engineering background was able to build them.
As for the Tank - giving it a Merritt Brown gear box and a land use Kestrel - lets be conservative and give it 350 HP thats almost twice what the twin bus engines were giving it OTL
So even if nothing else changed it is suddenly an awesome tank for the 1940 period
However my main issue with Matilda II is not however its foibles - low speed and armament (although the 2 pounder /BESA is not an issue when it was introduced) - no my issue is the incredibly small numbers produced by June 1940
The first Matilda was built in 1938 and by Sept 3rd 1939 - a second one had been built and 23 made it to France providing 4th and 7th RTR with a single Squadron each at Arras - the rest of their tanks were 77 Matilda 1 - which was a very heavily armoured machine gun armed tankette that was even slower than Matilda II and bore no family resemblance.
Wow!
Although production ramped up with 274 Matilda II being available by August 31st
Monthly production was increasing rapidly with 57 built in June to 90 in August and then 127 in December 1940
So what is needed is Tomos 'Chad' Matilda II with its superior transmission in far greater numbers.
For this a dedicated 'Kahn' type factory is required - with a large well lit factory building/s with a sufficient numbers of single use machine tools allowing people without letters after their names to build them - something like the Castle Bromwich Assembly plant but for the final assembly of AFVs instead of planes.
So once again we are back to an earlier realisation that the British army needs to be able to provide a continental force - which is likely beyond the scope of this thread but still an important consideration non the less - and the purse strings are lossened sometime in the mid 30s and not in late 38 which was too late.
I am not suggesting that had Britain sent 500 'Chad' Matilda IIs to France (instead of 23 Matida II, 77 Matilda I, 170 Cruiser and 300+ Light tanks) the campaign might have gone differently - unless Britain is able to send a force several times the size and or France sorts its shit out (again beyond the scope of this thread) - granted it might have given the Germans a bigger bloody nose.
No what this would do is provide the British with decent numbers of this tank in 1940 instead of the Mk IV light, Matilda I (a glorified heavy tankette) and lightly armoured Crusiers - a tank that would serve them better into 1941 - eg in North and East Africa
Then perhaps a 'Chad' Churchill with a better power plant (Meteor) and 6 pounder from 41
Then a 'Chad' Black Prince with an improved Meteor and 17 pounder (sloped frontal glacis) from 43
But it all requires more money earlier!