Agreed.
Labour has to deselect pretty much all their MPs, and they can form a new group in Parliament - the Blue Labour Red Tories, or something - who can select their own leader, and then fight it out with the labour activists at the next election.
In a Parliamentary democracy, the role of an elected MP is to form a judgement on what is best for their constituents, and from that view represent them. It is not to follow the dictatorship of party activists.