A LEADING European politician has made a renewed appeal to Theresa May to keep the UK in the single market insisting it is the best option for future relations.

Guy Verhofstadt, the European Parliament’s co-ordinator on Brexit, made clear that membership of the single market, the customs union and of the European Economic Area would be of greater mutual benefit than a free trade agreement.

Interviewed on the BBC’s Andrew Marr programme, the former Belgium Prime Minister said: “We want in fact more than free trade. We should like to have, for example, Britain still in the single market, Britain a member of the European Economic Area, Britain member of a customs’ union and so on.”

His intervention reflects the Scottish Government’s position which is committed to remaining in the single market as the “least worst” form of Brexit.

Its Scotland in Europe report published last month forecast GDP would fall by 8.5 per cent by 2030 if the UK Government failed to negotiate a trade deal and has to leave the bloc and fall onto World Trade Organisation rules. It would mean each person in Scotland would be worse off by £2300 a year. The report said even if the UK remained in the single market the economy would still experience a 2.5 per cent GDP slowdown.

However, despite repeated calls by Nicola Sturgeon, the UK Government has ruled out remaining in the single market or customs union.

Instead, the Prime Minister wants a bespoke trade agreement with “access” to the single market and no freedom of movement. The latter issue has led to considerable tensions between the EU and UK Government.

In yesterday’s interview Verhofstadt said it would not be acceptable to alter EU rules on the free movement of people during any Brexit transition and said it would be “penalising citizens” to continue without change in the areas of goods and financial services, but alter freedom of movement rules.

He said the EU was “very worried” about the issue of citizens’ rights.

He said: “It’s not acceptable for us that rules will continue without change for financial services, for goods, for whatever other business and only for the citizens their situation will change. That is penalising citizens.”

During the interview he also said it would be possible by the end of March 2019 to agree a withdrawal agreement, a transition period and an annex, a political declaration, describing a future relationship between Britain and the EU.

On Britain’s aims for a special bespoke arrangement for financial services, the MEP stressed the necessity of a “level playing field”. He warned: “What we don’t want is that with this whole agreement we establish a type of financial centre that is competing with the Continent not in a serious way by every time lowering taxes, lowering the type of rules so that we create a competitive disadvantage.”

He added: “There has to be a level playing field in this and no competitive advantage, neither for the Europeans and not for the British.”

Verhofstadt said the EU understood Britain wanted to diverge in a number of fields and regain its sovereignty, but added it would have to take the “consequences” of it. He said: “Everything is depending on the red lines of the British side. I say single market is the best solution for the British industry and the British economy, but the British Government doesn’t want that because the red line is no freedom of movement of people.”

He also went on to say he anticipated that if any deal was voted down by the UK Parliament there would be a “crisis in British politics” and maybe a new Government and a new position on Brexit, describing it “unknown territory”.

Meanwhile, shadow foreign secretary Emily Thornberry hinted Labour could shift its position to back remaining in a European customs union after Brexit while Scottish Tory leader Ruth Davidson suggested she could not support a no deal situation.

But responding to Davidson, Stephen Gethins, the SNP Europe spokesman, said the Scottish Tories to date did not inspire confidence.

He said: “The Scottish Tories at Westminster have been nothing but lobby fodder on Brexit propping up a failing shambolic government. Every time they have promised to stand up for Scotland’s interests – they have failed.

“Leaving the EU will impact on each and everyone of us, the ‘do nothing’ attitude of the Scottish Tories inspires absolutely no confidence.’’