In the phrase storm on Channel—Continent isolated, and variants:
– Channel denotes the English Channel, i.e. the sea channel separating southern England from northern France;
– Continent denotes the mainland of Europe as distinct from the British Isles.

This phrase is satirical of British insularity, since it describes Continental Europe as being cut off from the British Isles, instead of describing the latter as being cut off from the former (cf. also wogs begin at Calais).

The phrase storm on Channel—Continent isolated allegedly originated in a newspaper headline, but this is probably apocryphal.

The earliest occurrence that I have found is from The Yorkshire Post (Leeds, Yorkshire, England) of Wednesday 31^st December 1930:

The Criterion.
Among all the literary and critical reviews of the day, Mr. T. S. Eliot’s “Criterion” maintains its first place with ease and unoppressive dignity. The new number for the January quarter (Faber and Faber) has articles by Mr. H. M. Tomlinson, Mr. A. L. Rowse, Mr. Joseph Needham (on “Religion and the Scientific Mind”), Mr. J. G. Fletcher (on Delacroix), Mr. Alan Boase (on Several French Poets of the Time of Donne), and entertaining commentary by the editor on a number of significant books and utterances of the past quarter. What gives “The Criterion” unusual value is the inclusion of foreign “chronicles” and reviews of foreign periodicals, represented in the present number by an Italian chronicle and review of periodicals from Russia and Germany. “The Criterion” thus becomes a good antidote to the attitude which our chief national daily recently expressed so well in a time of Channel fog with its bold English headline, “The Continent Isolated.”
G. E. G.

The second-earliest occurrence of the phrase that I have found is from an article about a Knoxvillian named Charles Krutch, published in The Knoxville News-Sentinel (Knoxville, Tennessee) of Thursday 2^nd July 1931:

Charles Krutch returned today to his home at 717 West Main Avenue, picked out a few novel highlights of a three months’ stay in Europe, spent chiefly at the newly-popularized resort between Cannes and Nice on the French Riviera, Juin [sic] Les Pins—known in France as “pajama-land.” […].
[…]
[…] Krutch had various interesting conversations to report, especially with English people. Those he met on the Riviera or in Switzerland were from the so-called upper classes.
[…]
[…] English tradition is still alive. Krutch and his brother at times baited the Englishmen on their class system, charging that their upper classes had failed with their supposed superiority to manage affairs properly.
“But never did you find one to admit it. They still look upon the titled classes as somehow heirs of a natural superiority. In fact, the Englishman seemed to me to be extremely conceited. One of the best illustrations of that was one day when the London Daily Mail, from its small little island across the channel from the rest of Europe, appeared with this headline: ‘Storm Sweeps Channel—Continent Isolated.’”

The phrase then occurs in England Muddles Through (New York: The Macmillan Company, 1932), by the U.S. journalist and author Harold Ellicott Scarborough (1897-1935), who had resided for “rather more than eleven years in England as the correspondent of a great American newspaper”:

Presumably the London Times saw nothing amusing in its headline, “Continent Isolated,” when for three days a storm held up shipping in the Channel. It was an American woman resident in England who called my attention to this headline, and when I showed it to an English journalist he inquired, in honest bewilderment:
“Well, what’s wrong with it?”
I suggested gently that, having regard only to the population and superficial areas of the two geographical entities, foreigners might have been inclined to say “England Isolated” rather than “Continent Isolated”; but he didn’t see the point, and hasn’t seen it yet.

The newspaper reviews of England Muddles Through probably popularised the phrase. The following, for example, is from the review by P. W. Wilson, published in The New York Times (New York City, N.Y.) of Sunday 24^th April 1932:

Mr. Scarborough is much amused by a headline in The London Times. When there was a storm in the Channel that held up shipping “The Thunderer” announced “continent isolated,” and an English journalist, when shown the headline, asked: “Well, what’s wrong with it?” Indeed, “he didn’t see the point and hasn’t seen it yet,” and if Mr. Scarborough will permit us to explain, it is, after all, no laughing matter that any continent shall be isolated from England.

Soon, references to England Muddles Through were simply dropped. Here are two examples:

1-: From The Globe Man’s Daily Story, published in The Boston Daily Globe (Boston, Massachusetts) of Saturday 14^th May 1932:

It seems as if there must have been something wrong with the sense of humor of the British journalist whose attention was called to a headline in the London Times concerning a severe storm which was holding up shipping, which read:
“Continent Isolated.”
“Well, what of it?” inquired the puzzled Englishman. “I don’t see anything wrong with it.”

2-: From California ‘Remote Corner’ To Briton, published in the Modesto News-Herald (Modesto, California) of Thursday 26^th May 1932:

That intense insularity which distinguishes the British probably was never better illustrated than by the following sentence from an article on the Olympic Games in a London newspaper:
The games are to be held at Los Angeles, California, which at once raises a truly tremendous problem for the other nations, who have got to find their way to this remote corner of the earth.
[…]
The British habitually think of everything as remote which is outside the British Isles; Great Britain is the center of the world, and everywhere else is a corner of greater or less remoteness.
Some years ago there was a severe storm, which rendered the English Channel impassable by shipping for several days. And the London Times solemnly headed its account of the situation: “Continent Isolated.” That the mere idea of a continent being isolated was screamingly funny never occurred to the headline writer at all. To him, being cut off from communication with England could be nothing but isolation.

The alleged London Times headline came to be elaborated on. Here are two examples:

1-: From the interview by B. Z. Goldberg of the English political theorist and economist Harold Joseph Laski (1893-1950)—interview published in the Brooklyn Daily Eagle (Brooklyn, New York) of Friday 22^nd July 1932:

I remarked to Laski on the very noticeable provincialism that one meets with in London, worldliest of world cities.
“Haven’t you heard about that piece in the Times?” he asked in reply. “No? Take it down for your column. There was a storm on the channel one night. The next morning the Times ran the story under the headline: Storm On Channel—Continent Isolated.”

2-: From an article published in several U.S. and Canadian newspapers on Tuesday 25^th October 1932—for instance in the Arkansas Gazette (Little Rock, Arkansas):

London, Oct. 24.—The violence of the decline in sterling shook almost every department of the Stock Exchange. Financial writers professed to be undisturbed, however, and the outside public was kept calm by newspaper tactics recalling the classic headline one London paper once used: “Great channel storm—continent isolated.”