They would not have the funding required to start a new party and the Lib Dems would have to accept becoming New Labour 2.0 if they joined them, which I am not too sure the Lib Dems would be keen on. There are practical reasons why you cannot just up and start afresh.
They are going to have to fight to wrestle control of the Labour Party from the Corbynistas, not sure it is a fight they will win unless Corbyn resigns on 9th June and is replaced by a centrist, but it is their best chance.
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From the Guardian Comments:
And now, the end is near
As Labour face the final curtain
And Jezz? Well one things clear
He voted Leave, of that I'm certain
He's lived, a Trotsky fool,
Presented shows, for men who kills gays.
And now, it's come to this
He did it May's way.
Mistakes? he's made a few,
Again and again, too many to mention
He did, things he didn't have to do
Now we all wish, he'd draw his pension
His plans-just 6th form dreams
His every step, voters stay a-way
And now, it's come to this
He did it May's way
Yes there were times, we all could see
The sort of "friends" he had to tea,
But through it all, when there was doubt,
His Momentum mates, would bail him out,
As Labour fall, Jezza stands tall
And does it May's way
Not loved, we've laughed and cried
Now Labour's had, their fill of losing
Diane, and Ken and John, no longer seem, so amusing,
They think, we'd vote for that?
They make Michael Foot - look like Atlee
And now, it's come to this,
He did it May's way
For he's his own man, and what has he got?
His chance of winning? Far less than nought
He'll say the things he truly feels
While the PLP are forced to kneel
The record shows
He snubbed the "Noes"
And did it May's way.
Yes…..it was Maaaaaaaaaaaay's way.