Some 43 per cent of small companies have seen increased employment levels this quarter, compared to just 32 per cent in quarter three of the year, a survey has found.
The Irish Small and Medium Enterprises Association (Isme) published its fourth-quarter business trends survey today and said key indicators revealed upbeat sentiment moving into 2006.
However, it said the survey confirms that the cost base for Irish SMEs, particularly labour costs, continue to represent "the biggest threat" to small business.
Isme said the results showed the SMEs were more optimistic about future investment and employment prospects than in the previous quarter.
In a survey of over 450 companies, 42 per cent of companies are more optimistic about business prospects over the next 12 months in comparison to 39 per cent in the previous quarter. Just 15 per cent are less optimistic in comparison to 26 per cent in the last quarter, Isme said.
The most positive are the retail and service sectors, with a net 37 per cent and 30 per cent respectively, with a general increase in all sectors.
A total of 43 per cent of firms confirmed increased employment in comparison to 32 per cent previously, Isme said.
"The flipside shows that 16 per cent are employing less, similar to that reported in the previous quarter. The biggest increase in net employment was experienced in the retail sector (42 per cent), followed by distribution (41 per cent). The manufacturing sector has shown a significant net increase of 19 per cent, after a dip to 1 per cent in the previous quarter."
Some 28 per cent of companies now anticipate an increase in employment, the survey finds.
Isme said "an encouraging" 53 per cent of firms plan to increase investment in the next 12 months - up from 48 per cent last quarter. Just 7 per cent expect to reduce investment levels. A total of 63 per cent reported an increase in turnover this quarter.
Isme chief executive Mark Fielding said costs were the biggest threat to business, with wages, transport and energy representing the biggest cost increases in the last quarter.
He said these cost increases should act as a 'wake up' call' to the authorities to "finally realise that the indigenous sector cannot continue to sustain these levels of cost increases while striving for increased productivity".
"It is disingenuous of the Government, on the one hand to exhort indigenous businesses to move up the value chain and increase productivity and on the other hand restrict potential growth by sanctioning cost increases well above those of our competitors."