NICOLA Sturgeon has urged Theresa May to drop her “red lines” on leaving the single market for the sake of “future generations” and instead make the case for a soft Brexit as she prepares for the next phase of European talks.

The First Minister set out her position yesterday as she published a major new research report that presents a stark picture of the economic shock leaving the EU will have on Scotland – warning it will leave every Scot worse off by £2,300 a year and damage growth and business opportunities for decades.

At the outset, the report underlines that the Scottish Government “believes Scotland’s future economic, environmental and social prospects will be best served as a member of the European Union as an independent state”. It goes on to say this position does not clash with the “duty ... to vigorously protect Scotland’s interests under the current constitutional arrangement”.

The First Minister said single market membership fell short of full EU membership but was the “only option that made sense” for the Prime Minister in the forthcoming negotiations. She pointed out it would leave still leave each Scot £690 worse off a year by 2030.

“By insisting on hardline pre- conditions the UK Government is itself closing the doors on what can be achieved in talks with the EU on the future relationship,” she told journalists as she unveiled the new analysis Scotland’s Place in Europe: People, Jobs and Investment in Edinburgh yesterday morning.

“The aim of the Scottish Government, and the evidence presented in this paper, is to start opening those doors again. For the sake of jobs, the economy and the next generation, today we are calling on the UK Government to drop its hard Brexit red lines so that Scotland and the UK can stay inside the single market and customs union.”

She added: “Scotland is particularly well-placed to take advantage of the developing and deepening single market – the world’s biggest economy of 500 million people, eight times the size of the UK.

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

“That will mean more jobs and higher wages. It would be a tragedy for future generations if we let that opportunity pass us by.”

She continued: “The fact that the Prime Minister wants to leave not only the political structures of the EU but come out of the European Economic Area shows just how extreme the UK Government position is. With just weeks to go before the opening of talks on the future relationship that extreme stance must be dropped.”

The paper updates the main points put forward by the Scottish Government’s initial paper published in December 2016, which also argued for the whole of the UK to stay in the single market – allowing it a similar status as Norway, which is in the single market but is not a EU member.

Like the earlier document it also presents the case for a “differentiated” Brexit whereby Scotland could remain in the single market, even if other parts of the UK leave – a proposal that was dismissed by the UK Government as “unworkable”.

But, significantly, the report makes a fresh case for such a bespoke arrangement by highlighting that the UK Government has now put a differentiated deal on the table for Northern Ireland in order to keep an open border with the Republic of Ireland, which will continue to be in the EU.

“These proposals [for a differentiated approach] are particularly relevant given the nature of the commitments the UK Government has made regarding the island of Ireland. Here, in the absence of a comprehensive trade deal between the UK and the EU, Northern Ireland could have a different relationship with the EU, from England, Scotland and Wales,” said the report.

“This raises profound questions about the validity of the UK Government’s summary dismissal of the elements of the Scottish Government’s proposals for a differentiated relationship as unworkable.”

The First Minister laid out a set of grim forecasts of the economic damage caused by three Brexit scenarios – a soft Brexit, a Canada- style free trade deal, and having to revert to World Trade Organisation (WTO) rules – saying the analysis was “more detailed and extensive than anything so far provided by the UK Government”. Under the worst-case WTO scenario disposable income and business investment would fall by 10 per cent, she said, while staying in the single market was “the least damaging option by far”, with GDP to fall by 2.7 per cent by 2030, the equivalent of £4 billion.

“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,” she said. “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.”

She added: “If Brexit is to proceed, staying in the single market is the only option that makes sense.”