Next on David Cameron’s agenda is Europe. And Europe is ready and waiting.

Germany’s chancellor, Angela Merkel, knows the phoney war of recent years is over. It was obvious from her welcome for the Conservative party victory that she is primed for meaningful talks with the British leader before a referendum that will determine the UK’s status.

It was also clear that, along with the prime ministers of the right from Luxembourg, Finland and Spain, and onlookers such as the former French president Nicolas Sarkozy, she is sympathetic to reforms that undermine some of Brussels’ control-freakery.

One concession on the table is the tightening of “secondary legislation” governing the social security and welfare benefits available to EU citizens migrating to another EU state.

Donald Tusk, the president of the European council, and Jean-Claude Juncker, the president of the European commission, have indicated they can also agree restrictions on the ability of Polish and Spanish migrants to claim social security in the UK, or any other member state.

What they cannot do, and they have made clear to Cameron, is concede to his demand for restrictions on freedom of movement within the EU. In other words, a more fundamental overhaul of EU regulations is not on the cards.

For multinational companies, Merkel’s red line will be a godsend. While some bosses might want to scrap the working-time directive and the agency-workers directive, most large companies can live with the extra costs when they are common to all firms operating inside the EU, and the terms of trade are dramatically reduced by membership of the internal market.

Cameron and his likely chief negotiator, George Osborne, would probably be content with minor concessions, especially now that Ukip lacks a firebrand leader to whip up anti-immigrant sentiment. It is safe to say that Nigel Farage, rejected by the people of South Thanet, may return in some guise, but without the legitimacy that a parliamentary victory confers.

Boosting the chance of a referendum victory, the Tory leader can also count on opposition parties to back a package that in essence contains only minor reforms, given that Labour wants to stay inside the EU and so does the Scottish National party.

What, though, of the Tory right? There are some senior party officials who believe their guns are already spiked, claiming the mood in the country has switched away from blaming the EU for the UK’s ills. That would underestimate the influence of backbenchers such as John Redwood, the veteran MP for Wokingham, who said that to avoid Brexit, Cameron must win big concessions.

Within minutes of the Tories achieving an overall majority, he went on TV to say: “The British people will leave the EU unless there is a sensible offer on the table.” Interestingly, Redwood conceded that a treaty change was not on the cards. However, he then demanded the repatriation of banking regulation, oversight of member states’ annual budgets and the need to “regain control of our borders”.

It is on these points that Brussels is unlikely to give way, putting Cameron on a collision course with Redwood and his supporters, many of them from the intake of 2010 and 2015.

A war inside the Tory party, fought on TV and the streets during a referendum, should worry the business community. It is not just about the parliamentary numbers in a vote, something Cameron can probably achieve. The Tories need to go into a referendum vote standing together. For that to happen, business leaders should argue publicly for the benefits of being inside the union to get the best deal.

Norway is held up as the alternative model – standing outside the single market and its decision-making bodies, but forced to comply with the rules. For one of the world’s largest trading nations to go down this route would be bizarre. The UK needs to help set the terms of trade, even when the bargain is tough.