The retailing sector is likely to become increasingly competitive but the prospects for those who survive are encouraging, an economist with the ESRI has said.

Mr David Duffy said an increase in disposable income and in the number of households should fuel grocery demand. He said the volume of overall personal consumption should grow at an average of 4.7 per cent a year between 2000 and 2005.

Mr Duffy's report is included in the latest edition of the Irish Banking Review, published by the Irish Bankers Federation.

While demand will grow, changing lifestyles will change the type of grocery services provided, he added.

"Retailers have had to make shopping more convenient for the customer through the development of convenience stores, retail outlets at petrol forecourts, Sunday trading and the introduction of 24-hour opening by multiples around Christmas," he said.

He said one of the vital issues facing the sector was whether the Government permanently prohibit supermarkets which exceed 3,000 square metres of selling space.

The Minister for the Environment, Mr Dempsey, has issued an interim directive preventing such stores, but has asked consultants to prepare a report on the issue - which will have an important bearing on his final decision.

Answering a Dail question recently, Mr Dempsey said he expected the report to be published in mid April.