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Small Irish companies view labour costs and inflation as their biggest problems, according to a report from the Small Firms' Association (SFA).

Publishing its seventh national business survey, director of the SFA Patricia Callan said Ireland was becoming “an expensive and unattractive place to do business”.

“We awarded ourselves wage increases three times those of the international competitors” over the past five years, she said, adding that over the period Irish inflation has been running at almost twice the European Average.

The study outlines the 12 most negative factors facing small business seeking to invest, develop and create new jobs.

Among the more than 1,000 respondent companies, 87 per cent listed wage costs as a major problem, followed by inflation and energy costs.

Ms Callan said it was “now critical that productivity growth meets these cost increases in order for businesses to regain lost competitiveness”.

“Our inflation rate is a key component in regaining lost competitiveness and serious efforts must now be made by the Government to bring this within acceptable limits”, she added.

Arguing that “growth in the economy has been pushed to levels in excess of its potential the report found that a shortage of skilled staff was the fourth ranked issue, with more than half of firms struggling to attract the right people.