Panic is not a good basis for rational, long-term decision-making. But Britain's main rightwing party, or much of it, seems to have decided that the best response to an insurgent competitor is jumping off a cliff, leading the country into a void of uncertainty.

Retired ex-chancellors can perhaps be forgiven a bout of self-indulgence, but my cabinet colleagues should know better. Their behaviour has consequences, not least in shaping economic expectations. Global companies will ponder the wisdom of staying or investing in a country where business risk has suddenly been increased. Companies trading with the EU are barely recovering their confidence after the worst financial crisis for a century, and are now being told to expect years of debate over whether a network of trade and investment relationships should be torn up. At a time when jobs matter acutely, 3.5 million workers have been given an additional injection of job insecurity.

The debate about Europe is conducted on different levels, and mine is essentially practical. I have no time for political obsessives who bang on about the horrors of the European superstate or the Fourth Reich. Nor do I relate to federalists who believe we should subsume our national identity into something called Europe. Despite its share of follies (the common agricultural policy, the Strasbourg parliament, the working time directive), the EU is broadly a co-operative force for good, and the onus of proof lies with those who want to trash it.

The question many of my business contacts ask – especially anxious Asian and American investors – is "what does 'out' mean?". The answer isn't self-evident, and there are scenarios for minimum and maximum change (and disruption).

The least disruptive option is to try to secure a Norwegian type of association, keeping access to the single market in return for a budgetary contribution. But it is difficult to see how this could appeal to the Conservative "antis" since it keeps all the regulatory costs of the EU, with no vote in shaping them, as well as a cash payout. Lord Lawson makes it clear that he and his followers oppose such an option. They want properly out.

Leaving the EU thus means leaving behind the single market and the common external tariff, accepting the risk that a Britain might then face an array of tariff and non-tariff restrictions like the other "outs" – Turkey, say, or Ukraine.

To this, two different responses are given. One is that sensible EU countries like Germany would hurry to create a reformed single market for the UK, without the regulations the British dislike. Well, they might. Or might not. They might not persuade the French. Or they might, in the course of time, when they have completed other business, including similar arrangements with more important partners like the United States.

The second, cruder, sillier, reply is that since the UK has a negative trade balance with the EU we could "force" them to offer free trade by threatening trade protectionism. When ostensible free traders start arguing like this, one really begins to worry. Suffice it to say that leaving is a leap into the dark with, what Lord Lawson rather blandly admits, "transactional costs".

Why would any politician with the national interest at heart want such an upheaval? One good reason would be that the costs of membership are intolerable. But they are not. The worst estimates of the net budgetary cost involve our net contribution of 0.5% of gross domestic product. There are regulatory costs, of uncertain scale, but to make them significant you have to assume that Britain would be ruled indefinitely by free-market zealots who would dispense with product standards, and social and environmental protections. And they need to be set against the benefits of the single market.

Then there is the strange argument that Britain needs to leave the EU in order to focus on rapid-growth emerging markets. But why? When I have visited Russia, China, Brazil, Turkey, India, Indonesia, Vietnam, Korea and the rest, I am struck by the extent to which Britain has lagged far behind Germany, and even France and Italy. Those countries clearly haven't been inhibited by membership of the EU. Britain's problems are far deeper, and include a long period of exchange-rate overvaluation relative to Europe.

What really matters to the Conservative right is the City, or more specifically the banks, and the claim that the EU is regulating them excessively. Some of us bridle at the belief in the primacy of financial institutions that have caused so much economic havoc in the UK. The tail of finance capital should be docked, not allowed to wag the British dog. And actually, thanks to our post-Vickers bank reforms – on which Lord Lawson has been commendably radical – these things are happening anyway.

But even on its own terms, the banking-led argument for leaving the EU is dubious. The City of London shaped and arguably benefited from earlier EU financial services regulation, and might well suffer an exodus of footloose bankers if it left the single market. Roger Gifford, the lord mayor, an important figure representing the City, has forcefully argued that foreign banks, investors, and asset managers are seriously worried at the prospect of the UK removing its ties to the continent.

There is, however, one serious and critical argument with which pro-Europeans have to engage. Once the eurozone stabilises, it may well proceed to a deeper level of fiscal, financial and political integration than the UK is comfortable with. Britain and others may then increasingly find themselves, by default, in a Norwegian regulatory fjord. That would in turn precipitate a formal renegotiation of our relationship.

Either way, there will come a point when our relationship with the EU changes, and a referendum is appropriate. Parliament has already legislated for a referendum, should the constitutional arrangements change. To jump out now would be reckless in the extreme. Better to heed the common sense of the US president: "You want to see if you can fix what's broken before you break it off."