NICOLA Sturgeon used a speech in Dublin last night to set out why the Scottish Government believes the UK should remain in the single market and customs union.

Speaking at the annual dinner of the Dublin Chambers of Commerce, the First Minister said it was the obvious “compromise” choice.

The SNP leader also rejected the claim made by the Theresa May last month that the UK “has never totally felt at home being in the European Union”.

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Sturgeon said: “In Scotland – and this is contrary to a point the Prime Minister made in Florence two weeks ago – many people in recent decades have felt absolutely at home in Europe.

“The fact that the UK Government is committed to leaving the EU means that that Scotland – like Ireland, and like Northern Ireland – now faces a dilemma which is not of our choosing. We want to remain a full member of the EU but face being taken out against our will.

“We deeply regret that. However we believe that if the UK is determined to leave the European Union, it should remain a member of the single market and the customs union.

“In my view, that is the obvious compromise solution. It’s democratically justified – the vote to leave was a very narrow one across the UK, and two of the four nations of the UK chose to remain.

“It’s also clearly economically desirable. Leaving the single market will be deeply damaging for Scotland’s businesses, for our universities, for trade and for jobs.

“In addition, the difficulty of attempting to find solutions outside the single market is becoming clearer by the month.”

She added that “on virtually every issue of substance relating to Brexit” the Irish would have “an ally in Scotland”.

“Like you, we didn’t want Brexit. Like you, we support single market and Customs Union membership. And like you, we know that Ireland’s circumstances require particular attention, and we will argue strongly for an open border. We believe that those positions are in the best interests of Scotland, of Ireland, and of everybody on these islands,” the First Minister said.

The SNP leader’s speech came a day after Taoiseach Leo Varadkar told members of the Irish parliament, his government was working on contingency plans “if things do not work out” between Ireland and Britain after Brexit. “We certainly do not rule seeking special arrangements for Ireland and Northern Ireland but that is not by any means our negotiating positions or preference,” Varadkar said on Wednesday.

Meanwhile, German companies with sites operating in the UK said they too were preparing for a “very hard Brexit”.

Joachim Lang, managing director of the BDI, Germany’s main employers’ federation, said he was pessimistic about Brexit negotiations.

“German companies must make provisions for the worst-case scenario of a very hard Brexit,” he said. “Anything else would be naive.”

He added: “Brexit, whatever form it takes, throws up an incalculable number of legal, economic and business questions. The British Government talks a lot but doesn’t have a clear concept.”

Lang said the Tory party conference in Manchester this week was proof of “just how split” the party was over Europe.

In his remarks he also suggested there would likely be no transition period after Brexit day in 2019.

“Last weekend, UK foreign minister Boris Johnson said a transition should last not a second longer than two years. But officials in Berlin note that it took the EU and Switzerland 7-10 years to negotiate a treaty governing bilateral relations,” he said.

“Already, German companies are taking a more cautious, wait-and-see approach on investments in the UK.

Britain is Germany’s fifth-biggest trading partner, with bilateral trade amounting to €122bn last year.

According to the BDI there are two thousand German firms with offices in the UK, employing 370,000 people and accounting for €110bn of direct investment.

However, most of the goods they produce are made to be sold to buyers in continental Europe.