Mr Mundell called on the First Minister to take a firm line with the “fanatics” in her party who are “obsessed” with another vote on leaving the UK in the aftermath of the Brexit vote.
Nicola Sturgeon has said that a second referendum is “highly likely” after Scots voted for the UK to stay in the EU while the UK as a whole backed Brexit.
Mr Mundell said yesterday: “There are indications that some people in the SNP just simply see this situation as an opportunity to further the cause of independence, regardless of the EU issue.
“Nicola Sturgeon, instead of reducing uncertainty in Scotland, is maximising it by threatening another independence referendum.
“That’s not the way to increase business confidence in Scotland. She needs to take the independence issue off the table. I know it’s very hard for her because she has a lot of very fanatical people who are obsessed with having another independence referendum. But after my meetings with business and a cross section of people across Scotland, there’s no mood for another independence referendum.”
He insisted the situation is “already having an impact” on business.
“There’s already additional uncertainty in Scotland because the prospect of a second independence referendum is being touted,” he said.
Ms Sturgeon has established a panel of experts to examine the possibilities for maintaining Scotland’s relations with the EU in the aftermath of the Brexit vote and has pledged to “pursue all possible options to ensure that our voice is heard”.
She also recently set out five key tests against which this would be measured, including access to the EU single market and freedom of movement which was at the centre of concerns for many who voted Brexit. Opponents have claimed Ms Sturgeon’s tests have been “set up to fail” which would allow the SNP to hold a second referendum.
Ms Sturgeon yesterday announced plans to bring forward £100 million of spending to boost the flatlining economy in Scotland after Brexit.
Mr Mundell, who was meeting youth organisations in Glasgow to discuss their concerns about the impact of the Brexit vote, claimed the funding was “an announcement of money that had been underspent from last year”.
The UK Conservative cabinet minister said: “The number one thing that Nicola Sturgeon can do right now to boost the Scottish economy is to remove the uncertainty of a second independence referendum.
“She can take that off the table right now. That’s what businesses say that they want. They don’t want a second independence referendum to be clouding these discussions about the EU.”
Mr Mundell said the Scottish Government should be working alongside Westminster on “getting the best possible deal for Scotland and the UK out of these EU negotiations”.
Prime Minister Theresa May pledged she would “listen to anything the Scottish Government brings forward” about how Scotland – where 62 per cent voted for the UK to stay in the EU – could have a different arrangement with the EU, Mr Mundell added.
However, he said UK ministers “haven’t heard anything”, adding: “We haven’t had any feedback in relation to what has been proposed or suggested.”
An SNP spokesman said: “David Mundell and his Tory colleagues are the very last ones who should be trying to lay down the law to the people of Scotland – the Tories are the ones who have created the chaos, confusion and deep economic uncertainty caused by Brexit.”