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Directors of Standard Life are preparing to issue a coded warning next week on the dangers of Scotland’s tax regime diverging from the rest of the UK as business leaders fret over the fallout from the Scottish National party’s landslide victory.

While executives and investors in much of the UK cheered the victory of a business-friendly Conservative government, their counterparts in Scotland were warier of the outcome after the left-leaning SNP won 56 out of 59 seats north of the border.

Several business and financial services leaders raised concerns about the chances of a more onerous, more fragmented and more complicated tax regime. David Cameron pledged on Friday to hand Scotland “important powers” over tax.

Directors at Standard Life, the FTSE 100 insurer, are expected to highlight the importance of retaining a “single market” in UK financial services at the insurer’s annual meeting next week, City sources said, although the comments are likely to be carefully worded.

Standard Life declined to comment on Friday.

Douglas Connell, senior partner at Turcan Connell, one of Edinburgh’s best-known legal firms, said: “In Scotland there is a leftwing agenda that may now be part of the culture. The long-term direction of travel is that Scotland will become a more highly taxed country.”

Alasdair Humphery, an Edinburgh-based director at the property group JLL, said: “It’s difficult to see how a second referendum isn’t closer than it was when this election campaign began. Uncertainty over the future of the union will once again create some hesitation over investing in Scotland.”

Publicly, business groups including the CBI struck a neutral tone on the SNP’s success, with some executives saying the prospect of Britain leaving the EU was a bigger concern.

But even though the SNP will not be in power in Westminster, some Scotland-based financial services groups that serve customers across the UK are nervous at the possibility of diverging tax regimes for pensions, savings and investments.

Owen Kelly, chief executive of Scottish Financial Enterprise, which represents the financial services industry, said full-blown fiscal autonomy for Scotland could “raise some of the questions that came up in the independence referendum”.

A wholesale transfer of tax powers would be likely to have “clear consequences for business. They’d have to serve two separate markets, and that would be more costly for customers.” However, he added: “We’re going to wait and see how things pan out.”

One senior Edinburgh-based banker put it more bluntly. He said the “unholy alliance” of the Conservatives and SNP was “a nightmare outcome if you are a Scottish unionist”.

However, Barney Reynolds, head of financial institutions advisory at the law firm Shearman & Sterling, said that compared with the potential implications of a Yes vote in the independence referendum last year, the SNP’s Westminster gains were a “very small deal” for the sector.

“It clearly affects the political backdrop, and that in time could lead to other things, but for now it’s not something that affects financial services location per se.”

Alastair Ross, an Edinburgh-based public policy expert at international law firm Pinsent Masons, said claims that the SNP was “anti-business” were ill-founded. “The party’s track record in Holyrood shows it’s keen to work with business,” he said.

He added that neither London nor Edinburgh could “afford to be dragged into continual dispute. They need to demonstrate that the UK [including Scotland] remains a viable and attractive market place for investment”.

Additional reporting by Caroline Binham

Copyright The Financial Times Limited 2017. All rights reserved.
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