The authors apply the Migdal-Kadanoff real space renormalisation group method to study the Lebwohl-Lasher lattice model of liquid crystal behaviour in two dimensions. The model supports a phase transition similar to the Kosterlitz-Thouless transition in the two-dimensional XY model of magnetism. However, the liquid crystalline order at low temperatures is unstable to any symmetry breaking crystalline field. This suggests that thin nematic films may be experimentally unrealisable.