Scotland's place in Europe: speech

A warm welcome to all of you.

It is a pleasure to be here in one of Scotland's world-class universities.

Of course this month marks the 45th anniversary of the UK's membership of the European Union.

Of course the EU is not a perfect organisation by any means but it has undoubtedly helped to preserve peace on our continent, and its member states benefit from being part of the world's largest economy.

The Scottish Government believes very strongly that the best option for Scotland, and indeed for the UK as a whole, is to remain within the European Union.

Indeed, that is what 62% of people in Scotland voted for in the referendum in 2016.

But we recognise we must also be pragmatic and it is our duty to seek to protect Scotland's interests in all circumstances.

That is why just over a year ago we published Scotland's Place in Europe, setting out a compromise proposal of retaining membership of the European single market.

With the next phase of talks to determine the future relationship between the EU and the UK due to begin in the next few weeks, it is time now to make that case for continued membership of the single market even more loudly than before.

Today we do exactly that, backed by new evidence of the importance of single market membership to our economic and social prospects.

The first phase of the talks between the EU and UK – which let's remember was meant to be the easy part - ended, after months of wrangling, only when the UK effectively agreed to all of the positions set out by the European Union at the very start of the process.

I think there is an important lesson to be learned here as we enter the talks on the future relationship - the UK Government mustn't waste time in this next phase, seeking what they know to be unachievable. Common sense and hard headed economic considerations should prevail from the start this time.

What the modelling in this paper that we are publishing shows, beyond any doubt, is that if the economy, living standards and investment are our priorities, staying within the single market is absolutely essential to minimise the damage of leaving the EU.

The analysis that we publish today is more detailed and extensive than anything so far provided by the UK Government. And that in itself speaks volumes about their reckless and irresponsible approach.

This paper looks at the only three realistic outcomes of Brexit.

These are, firstly, staying in the single market.

Second, concluding a free trade agreement similar to that between the EU and Canada.

And, third, reverting to World Trade Organisations terms - the so-called 'no deal' option.

Our modelling takes account of the impact on trade, productivity and migration of each of these possible future relationships.

Let me be very clear - this analysis shows that none of these options are as good as staying within the EU. Our economy will take a hit under all of them.

However, the least damaging option, by far, is staying in the single market.

Let me outline, as briefly as possible, with apologies for the flurry of statistics you are about now to receive, the key implications for our economy by 2030 of each of these options compared to what the situation would be if we stayed in the EU.

Under the so-called 'no deal' option - a WTO based relationship - our GDP will be 8.5% lower by 2030 than if we were to remain in the EU .

That is equivalent to £12.7 billion or £2300 for every person in Scotland. Under this option, real disposable income would also be 9.6% lower and business investment 10.2% lower.

Under the option of a free trade agreement, GDP would be just over 6.1% lower - equivalent to £9 billion or £1600 for every single one of us in Scotland. Real disposable income would be over 7.4% lower and business investment lower by almost 8%.

And staying in the single market, compared to full EU membership, would reduce GDP by 2.7% - that's equivalent to £4 billion or just under £700 per head of population. Under this option, real disposable income would be 1.4% lower and business investment lower by just under 3% than if we were to stay in the EU.

So it is clear from these figures that staying in the single market does not insulate us from the costs of leaving the EU - but it will minimise those costs.

Indeed, compared to a hard Brexit, staying in the single market will benefit us to the tune of £1,600 per head. £1,600 for every person in Scotland.

Now much of the Brexit debate so far has understandably focused on the prospects for trade.

But within Scotland we know that it is our need to grow our population and improve productivity that are most often cited in our current economic debates.

Indeed, these factors featured prominently in the Scottish Fiscal Commission's recent growth forecasts published alongside our draft budget.

So it is striking that when you read the details of the analysis we published today that it shows that the economic hit we will take comes not just from a loss in trade, but actually more so especially in the longer term, from losses in productivity and population - the very things we need to improve on if we are to boost growth, jobs and living standards.

So the evidence we present today is clear. The best way to minimise the economic damage of Brexit is to stay inside the Single Market.

It is also in my view the best way to safeguard workers' rights and the social, consumer and environmental protections that we have come to take for granted.

Of course, so far I have talked about the benefits of staying in the single market as it is just now.

But the single market is not yet complete.

The paper also sets out the future opportunities of continued membership for services, energy and the digital economy in particular.

It seems inconceivable that while 30 countries of the European Economic Area, and those still to join, will enjoy the benefits of that growth while we will be left outside.

Indeed, that is particularly frustrating a prospect as Scotland is very well-placed to take advantage of the developing and deepening Single Market.

Our world-class universities, our potential in renewable energy, our life sciences, our digital sector and other key areas of the Scottish economy are all in prime position to reap the rewards of these developments.

And that would mean more jobs and higher wages.

So it would be a tragedy for future generations if we let that opportunity pass us by.

In services, for example, where both Scotland and the UK as a whole have a comparative advantage, the long-term potential gain from completing the single market is estimated to be of the order of 2.4 per cent of EU GDP.

A boost of national income of that size in Scotland would be equivalent to £3.6 billion, or almost £700 per person.

Enhancements to the Digital Single Market could mean a further increase in EU GDP of nearly 2%.

For Scotland, that would be equivalent to almost £3 billion, or over £500 per person.

So this paper sets out the positive case, and the significant economic benefit for Scotland, if we retain our place in the Single Market, compared with all of the other Brexit options.

And finally, before I hand you over to Michael, the paper looks at the issue of migration, which I recognise is not always an easy subject for politicians.

The paper briefly explains free movement in the EU context - what it does and does not mean, its restrictions as well as its entitlements.

But more importantly it sets out why our continued ability to attract EU nationals to live and work here is so essential to our future economic prosperity.

Growing our population, and particularly our working age population, is perhaps the greatest national challenge that we face.

Over the past 15 years, EU migration has helped to turn around the long term decline in Scotland's population and mitigate the impact of an ageing society.

But we still face a big demographic challenge. Over the next 25 years, our own projected birth rate will not be sufficient to grow our population.

In the period to 2041, all of our projected population growth will come from inward migration. Without that, our population could go into decline and with it our ability to grow our economy and fund our public services.

So that would be the stark reality for Scotland of a restriction in our ability to attract people to our country.

And that is why, as First Minister, I have a duty to make the case for free movement no matter how difficult that is sometimes perceived to be.

Of course, the opposition to free movement on the part of some people is often based on the view that migrants are somehow a burden and that could not be further from the truth.

The contribution of our fellow EU citizens is far more than just economic. Those who do us the honour of making Scotland their home make our country stronger in so many ways.

But the economic benefits are clear and this paper sets them out.

For example it finds that each EU citizen contributes, on average, £10,400 in tax revenues.

That is tax revenue that helps fund our NHS and our other public services.

So in short, free movement should not be a barrier to staying in the single market - on the contrary, our demographic challenge makes it all the more important that we do so.

So in conclusion, this paper provides a far more comprehensive assessment of the different post Brexit options than anything so far offered by the UK Government.

It demonstrates beyond doubt that if Brexit is to proceed, then staying in the single market is the only option that makes sense.

Over the coming weeks and months the Scottish Government stands ready to work with others to minimise the damage of Brexit.

We will continue,as we have been doing, to reach out and engage with businesses, civic organisations, other political parties and government administrations, and with people across Scotland, the UK and the rest of Europe.

The weight of evidence in favour of staying in the Single Market is compelling - and I believe there is a majority there to be harnessed that can achieve at least that outcome.

So I hope that the UK Government will now start to listen to this evidence.