An increase in the minimum wage due in February should be deferred because small businesses cannot afford it, the Chambers of Commerce in Ireland (CCI) has said.

With many small companies struggling to cope with sharp rises in insurance and wage bills, raising the minimum wage from €6.35 to €7 an hour would put many under unsustainable pressure, said Mr Mark Staunton, president of CCI. Companies would also be forced to raise salaries further up the pay scale, he warned. He called for the increase to be phased in.

Mandate, the union representing retail and bar workers, said it was unfair of the CCI to target the lower paid.

Despite concerns over a higher minimum wage, most small companies were cautiously optimistic about their prospects for 2004, according to a CCI survey.

Of 600 firms questioned, 28 per cent believe the business environment will improve, while 42 per cent believe it will be broadly in line with 2003. Six in ten expect to hire additional staff.

The findings of the survey were an indictment of Government business policy, which was doing little to help small companies, said Mr Staunton.

"Stealth" taxes had been a particularly serious burden in 2003, he said, although insurance remains the biggest concern.