More than four-fifths of Scottish business leaders are concerned about divergence between income tax north of the Border and that in the rest of the UK, a survey shows.

The poll by the Institute of Directors in Scotland also shows more than three-quarters of the business organisation’s members north of the Border believe the Scottish Parliament has paid insufficient attention to growing the economy since it was reconvened in 1999.

IoD Scotland’s 2024 State of the Nation directors’ survey follows further moves to increase income tax for higher earners in Scotland in the Scottish Budget in December.

A new “advanced” band is being introduced which will apply on incomes between £75,000 and £125,140, set at 45p. And the top rate of income tax will increase by one pence to 48p in the 2024/25 tax year.

Asked in the survey how much of a concern income tax divergence in Scotland is for them or their primary organisation, 54% of respondents said it was a “serious concern”. And 28% declared it was a “slight concern”.

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Meanwhile, 14% said it was of “no concern”.

When asked, if the concern is serious, about the areas on which divergence would have an impact, 39% flagged “hiring”, 27% said “investment”, and 34% opted for “choice of location”.

Around 61% of IoD Scotland members said they have the right number of skilled people for current jobs, up from 54% in last year’s survey.

However, only 54% reported they were confident of being able to recruit sufficient skilled staff in the next 12 months, down from 57% last year.

Catherine McWilliam, nations director for Scotland at the IoD, said: “The skills gap continues to be a key concern for our members. Future recruitment and staff retention are key when business planning, and our data shows business leaders think that the introduction of the new tax band in Scotland will make things even more difficult for them.

“Responses show that leaders clearly see Scotland’s tax regime as yet another barrier to attracting and retaining talent - and encouraging investment.”

When asked to describe their views on taxation in Scotland, 71% of respondents felt business taxes were too high and 74% felt the same for personal taxes.

IoD Scotland declared that “results were more positive across other key areas”.

It observed that 69% of respondents had stated their intention to grow in the next 12 months.

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IoD Scotland added: “Employment and cybersecurity were identified as key priorities for the next five years, and there is real appetite for embedding AI (artificial intelligence) tools into businesses, with 80% of respondents feeling optimistic about opportunities, and 46% noting that AI is already being used within their organisation.”

Meanwhile, 76% of respondents felt there had been insufficient attention to growing the economy from the Scottish Parliament since 1999, while 50% of IoD Scotland members said they needed more support to meet the country’s net-zero ambitions.

Asked if the New Deal for Business, announced by Humza Yousaf in spring last year after he became First Minister, had helped improve relations and engagement between Scottish business and the Scottish Government, 7% of respondents said “yes” or “to an extent”, while 43% said “no” and the remainder were “not sure”.

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Ms McWilliam said: “Compared to 2020, today’s business landscape is very different. Leaders have an abundance of opportunities to better their businesses through AI, net zero, fair work, inclusivity, and diversity, and many of them are keen to tackle these areas alongside working towards growth.

“But these areas are at the risk of being seen as ‘nice to have’, remaining simply as ambitions, if we don’t get the fundamentals like access to skilled workers and policy implementation right. Business leaders need to be able to build solid foundations upon which they can focus on policies for the betterment of their communities, and society as a whole.”

She added: “Collaboration is key - by creating clear channels of communication and a meaningful opportunity to engage with decision-makers about the challenges facing businesses, we can create a thriving economy that will attract talent and investment from the rest of the UK, and further afield.”

The survey attracted 180 responses between January 22 and March 4.