Thanks to the people who have posted and found this whole section that helps clarify the situation. The referees are there to identify and maybe contacted to confirm, and should this not suffice further request for an additional referee is requested.
6.3.7 Referees - Qualifications
6.3.7.1 All applicants, except those seeking to renounce British nationality, are asked to provide two referees so that we can be satisfied about a person’s identity. We would not routinely contact referees, but may do so on the authority of a senior caseworker if this could resolve any concerns about the application.
6.3.7.2 If the application has been received in the Home Office more than 6 months after the date on which it was declared by the referees there is a possibility that the applicant's circumstances have changed. The form should therefore be returned to be re-declared by the referees to ensure that the information given is up to date.
6.3.7.3 For adult applications each referee should have known the applicant personally for at least 3 years.
6.3.7.4 One referee should be a person of professional standing,as per the list in Annex A.13
6.3.7.5 The other referee must be the holder of a British citizen passport and either a professional person or over the age
of 25.
6.3.7.6 Referees should not:
be related to the applicant
be related to the other referee
be the applicant’s solicitor or agent representing
him or her with the application
be employed by the Home Office
have been convicted of an imprisonable offence during the past 10 years for which the sentence is not spent under the Rehabilitation of Offenders Act 1974.
6.3.7.7 If the applicant is living abroad and does not know a British citizen passport holder who is a professional
person or over the age of 25, a Commonwealth citizen or citizen of the country in which he or she is residing may complete and sign the form, provided:
he/she is over 25 or has a professional standing in that country and
has known the applicant for three years, and
the Consul considers his/her signature to be acceptable.
Referees – Checks and enquiries
6.3.7.11 We may carry out checks on referees to ensure that the criteria in paragraph 6.3.7.6 are met.
6.3.7.12 If it is clear from any information we may have that a referee does not meet one or more of the criteria in paragraph 6.3.7, the applicant should be asked to provide an additional referee. This should be done by sending a Referee-Additional letter together with a printout (from the UKBA website) of the appropriate 15 page from the relevant application form.
6.3.7.13 Referees are asked:
how long they have known the applicant
how, when and for what reason they met or meet the applicant