Rising inflation, increasing raw material costs and wage demands are driving Irish companies out of business in spite of the strength of economic growth, according to credit-rating company Dunn & Bradstreet.

Company failures rose sharply in the second quarter of the year and were 65 per cent higher than in the corresponding quarter of 1999, according to the agency's latest statistics. Some 180 companies went out of business in the three months to the end of June, compared with 109 failures in the second quarter of 1999.

It is the highest level of second-quarter failures since 1994. The latest quarterly figures show a rising trend of company failures since the third quarter of 1999.

Commenting on the latest figures, Dunn & Bradstreet managing director Mr Greg Connell warned that the ability of companies which were already strapped for cash to meet demands for higher wages would be a key determinant of the future prospects of companies currently on the brink of failure.

Dunn and & Bradstreet bases its quarterly analysis on the company failures published each month in Iris Oifigiul. Only companies that have actually gone out of business are counted.

The rising number of company failures is not indicative of anything fundamentally wrong in the economy, said Mr Connell. It partly reflected the big increase in the number of company start-ups in 1995, 1996 and 1997 which has resulted in a proportionate rise in the number of failures. But he warned that changing economic conditions such as higher wage demands, higher raw material costs and rising interest rates were pushing weaker companies towards failure.

In the first quarter of this year, some 225 companies failed, compared with 178 in the first quarter of 1999. In the final quarter of 1999, there were 286 failures, up from 155 failures in the final quarter of 1998. And the 176 failures in the third quarter of 1999 compared with 150 in the corresponding previous quarter.