By the morning of 16 June 1941, the British situation in Operation Battleaxe was not progressing well. The desert flank, particularly the 7th Armoured Division, had some 48 cruiser tanks still running. The 4th Armoured Brigade, with the 4th Indian Division, was down to about 40 running infantry tanks. They British had not been seriously engaged with the German armored forces, so they figured to still have most of their 170 medium tanks (mostly Pzkw III with some Pzkw IV tanks).
The plan for 16 June was for the forces near the coast to stage a frontal attack on Halfaya Pass, which sounds like a bad idea. The center column could push towards Bardia. The infantry tanks of the 4th Armoured Brigade would attack Hafid Ridge. The 7th Armoured Division forces would engage the German tanks that had arrived the previous evening.
The Germans decided to go on the offensive in the morning of 16 June. The 15th Armored Division would attack Fort Capuzzo. The 5th Light Division would attack the British tanks on the coast. The Ariete Division was to move to Ed Duda.
Almost accidentally, the British infantry tanks were actually in position to support the infantry during the German attack at Fort Capuzzo. There was the 7th RTR with artillery support seriously damaged the German 8th Armored Regiment. The regiment had started with battle with 80 tanks, but now was reduced to 33 runners. The 4th Armoured Brigade stayed with the 4th Indian Division and was not allowed to go to Hafid Ridge.
The Guards brigade had some success. The Scots Guards took Musaid and then the barracks at Salum. The 4th Indian Division frontal attack on Halfaya Pass predictably failed. On the desert area, the 7th Armoured Brigade was successful in stopping a German attempt around the flank.
The British had done better than they might have deserved, and this caused the Germans concern that they might break through to Tobruk. Rommel hoped to send the 5th Light Division against the desert flank, but the division was tied up kept the attack from happening. By late afternoon on 16 June, the British situation deteriorated greatly. The 7th Armoured Division tanks were dispersed, rather than kept concentrated. They lost the artillery support that they had previously had. The cruiser tank regiments were later attacked by the 5th Light Division with artillery support. They were saved by the fall of night. Another attack on Halfaya also failed. By the end of 16 June, the British tank strength had shrunk. They had about 25 cruiser tanks and about 29 infantry tanks. This is based on the account in Vol.III of the Australian Official History.