Churchill expected neither favourable terms nor a durable peace with Germany in 1940. A settlement would give Hitler time to consolidate his gains. Further ambitions would then bring another confrontation, potentially from a stronger German position. Continuing the war is assessed against that expectation of what a temporary peace would permit.
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Why Churchill rejected peace talks in 1940
The refusal to negotiate rests on the expectation that Hitler would use a settlement to prepare for further expansion.