Tony Watson, the chief executive of Hermes Pensions Management, has resigned as a non-executive director of Edinburgh Fund Managers (EFM) following disagreements with the board over the running of the UK investment house.

The resignation comes as EFM recorded a 40% drop in profit for the first half of the year, lost its largest client and was forced to shut offices in the US in an attempt to cut costs. Late last year Hermes also attempted to buy EFM.