It’s hard to know whether England sitting off and allowing Italy so much possession for so long was the players losing their nerve or a conscious tactical decision from Southgate. The fact he took so long to change it implies the latter IMO though of course that’s speculation.
Though the continued selection of Mount (who looks a player for Chelsea but has never quite convinced me in an England shirt) is an issue for me, I think the main issue was mental and tactical, not the selection per se. England with Mount in the side proved at the start of the game that they could play on the front foot and create chances. It was clear from the first 10 minutes of the second half that they would continue to be passive unless a change was made and that change took too long.