TWO thirds of Scottish small employers with EU workers are concerned about future skills shortages as the nightmare of Brexit unfolds, according to new research from the Federation of Small Businesses (FSB).

The study shows one quarter (26 per cent) of small businesses currently have a member of staff in other EU countries, with this figure rising to two in five (41 per cent) in the Highlands.

By comparison, about a fifth of UK firms have an EU worker.

The small business campaign group says it is therefore vital for Scottish businesses that EU workers are given the right to remain in the country after the UK leaves the EU.

Mike Cherry, FSB national chairman, said: “There is real concern among small firms with EU staff that they will lose access to the skills and labour their business needs to survive and grow. EU workers are a vital part of our economy, helping to plug chronic skills gaps across a wide range of sectors, and filling jobs in an already tight labour market. From packers, to mechanics, to graphic designers, small employers need to be able to hire the right person, for the right job at the right time.”

‘A skilful exit: What small firms want from Brexit’ is FSB’s latest research paper on the impact of leaving the EU — and a Scottish version of the report has been published. The new research shows that, if Brexit creates additional barriers to recruiting EU citizens, Scottish small employers would consider reducing operations (37 per cent), closing their business (19 per cent), or moving their business abroad (12 per cent).

Nine in ten Scottish firms (89 per cent) recruited their EU workers when they were already living in the UK and the vast majority of UK small firms (95 per cent) have no experience of using the UK’s points-based immigration system to recruit non-EU workers.

Almost half (45per cent) of Scottish smaller businesses in the tourism and leisure sector have an EU worker. However a similar proportion of smaller firms with EU workers say they mainly employ people with mid-level skills, which are positions which require specialist skills or training.

Andy Willox, FSB’s Scottish policy convenor, said: “Smaller Scottish employers don’t have the resources of their larger counterparts to navigate complex immigration systems. Any future system needs to work for the real economy – and needs to flex to adapt to the needs of all sectors and geographies. It can’t just be big businesses that gain access to the skills they need.”

The FSB is also recommending changes to the Scottish skills and education system to try to mitigate the impact of any immigration changes.

Willox added: “Our data shows that our members predominantly recruit non-UK EU citizens because they’re the best candidates. If our immigration system is set to change, then our skills system needs to do the same.”

Labour MP for Edinburgh South Ian Murray described the study as a “stark warning” from small businesses, who are the lifeblood of our economy, about the cost of Theresa May’s hard Brexit.

He added: “In Edinburgh South, across Scotland and the whole of the UK, workers from the EU play a vital part in our economy and society. As the FSB suggests, the Tories’ damaging pursuit of a hard Brexit at any cost could cause a harmful skills shortage for the small businesses that contribute so much to our economic growth. As the Scottish economy struggles we need to reduce uncertainty for businesses, not create more. Labour would guarantee the rights of all EU workers to stay in the UK as they contribute so much to our economy and society.”