By way of followup I've had feedback from Europcar Customer Service in the UK and separately from their Twitter team that the reservations desk in Birmingham airport were wrong. There is absolutely no need to insist that the renter be a citizen as residency is sufficient. No one has yet explained or answered why we were presented with the document that states citizenship is required but they have advised that their terms and conditions (9.2.2) makes it clear that citizenship is not required. The twitter team said something similar although they referred me to section 8.2 of their terms and conditions document.
I hope they retrain the jobsworth at the airport who wasn't prepared to investigate it further at the time. We received a full refund of the prepaid Europcar reservation and rented elsewhere.