EU workforce ‘contributes more than £7bn’ to Scottish economy

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EU workers contribute a massive £7.3 billion to Scotland’s economy and there are fears over the impact of Brexit on the country’s flagship tourism and finance industries, MSPs have been warned.

Edinburgh’s reliance on financial services is greater than any other city in Europe, a report for Holyrood’s economy committee says, prompting concerns over “lost jobs and business” from any loss of full access to the key EU market.

The Scottish Government last night said it showed EU workers make a “significant economic contribution” in Scotland and underlines the case for protecting the country’s EU status.

Leading economists will give evidence before MSPs tomorrow on the impact of Brexit and the potential effect on Scotland’s fragile growth has been set out in a report by economic consultants 4-consulting.

Around one in 20 people in Scotland’s 2.6 million-strong workforce are from other EU countries and the UK Government has failed to guarantee their right to stay after Brexit.

“EU workers in Scotland are paid a higher average hourly pay than any other part of the UK outside of London,” according to a submission to MSPs from 4-consulting.

“This may point to EU workers engaged in higher value added activities in Scotland compared to the rest of the UK.”

EU workers also account for about 5.8 per cent of the total wages paid out to workers in Scotland, a higher share of average workers’ income, meaning they play a significant role in total wealth creation.

“Using an economic model and underlying data published by the Scottish Government the economic contribution of workers born in other EU countries was estimated to be around £7.3 billion in Gross Value Added (GVA) each year,” the 4-consulting submission adds

And the role of EU workers in the key tourism and hospitality markets is also set out in stark terms where they make up almost 9 per cent of the total workforce and also play a “disproportionate” role.

About 42,000 work in this sector, with a further 33,000 working in the education, NHS and other public sector, while 12,000 work in factories.

Scotland’s financial services industry employs up to 180,000 people directly and indirectly, including about 20,000 EU workers.

It contributes £8 billion to the economy. It comprises some of the country’s biggest firms including Standard Life, RBS, Aberdeen Asset and Management and the Alliance Trust.

The report today sets out the critical importance of the industry north of the border has been set out in stark terms.

“Edinburgh’s economy is more reliant on financial services than the London economy or any UK city economy,” its states.

“Edinburgh’s share of financial services is markedly ahead of most large European cities.”

The 23.8 per cent reliance on financial services in Edinburgh compares with 18.9 per cent in London, 17.3 per cent in Brussels and 17 per cent in Amsterdam. Glasgow’s financial services sector is worth about 12.4 per cent to the city’s economy.

Other European Union centres, including Paris or Frankfurt, are already angling to steal London’s crown as Europe’s finance capital post-Brexit – with knock-on effects for Scotland

The biggest concern facing Scots finance houses is an end to the “passporting” arrangement which allows them to provide services throughout the EU as long as they are operating form a UK base. Goldman Sachs and JP Morgan are among the institutions which have warned of the importance of the UK’s membership of the EU in securing such an arrangement, which means global firms that establish a UK subsidiary can trade EU-wide.

First Minister Nicola Sturgeon has already voiced concerns over the status EU nationals in Scotland amid concerns that their status could be used a negotiating tool by UK ministers in Brexit talks. The UK government insists that this would only be conditional on UK nationals living in other EU states receiving reciprocal treatment.

A Scottish Government spokeswoman said last night: “People in Scotland voted overwhelmingly to remain in the EU and the Scottish Government firmly believes EU membership delivers many social, economic and cultural benefits for individuals, business and communities.

“We have made clear to people from other EU countries who are currently living and working in Scotland that their contribution is valued and they are welcome here. They make a significant economic contribution with thousands of businesses across a range of sectors, including financial services.

“Scotland has a world class financial services sector – and clearly there would be potentially huge advantages to the industry and our economy as a whole in terms of jobs and investment if we secure our EU status and position in the single market. That is why we are doing everything we can to protect Scotland’s interests. We will continue to press for guarantees that EU nationals living and working in Scotland can stay here should the UK Government impose Brexit against the wishes of the people of Scotland.”

A BMG Research poll published yesterday revealed 58 per cent of people want the UK government to guarantee the right of EU citizens to continue living and working in the UK, while just 28 per cent disagreed.

A spokesman for ther Liberal Democrats also warned of the impact on Scotland’s financial services industry of Brexit.

“Edinburgh’s financial sector has been able to reach new heights partly thanks to the membership of the European Union,”he said.

“Leaving the EU will result in lost jobs and business. That’s why Liberal Democrats support a referendum on the deal the Conservative Government’s reach with the European Union. People deserve the right to protect our financial sector alongside other jobs and opportunities.”