Wage costs are the single biggest concern to small and medium enterprises (SMEs), according to the second quarterly business trends survey published by ISME today.
The increasing cost of doing business in the State is depressing the employment prospects for small and medium enterprises, and demand for employees is likely to be lower than over the previous 12 month, according to the survey.
The level of investment is also expected to dip over the next 12 months. However, on a more optimistic note over twice as many companies employ more staff that the same period last year. Manufacturing, in particular, showed an increase.
The report said 17 per cent of manufacturing companies had a favourable outlook compared to a 16 per cent rise for the services sector and a 7 per cent for distributors.
Optimism in the retail sector was reportedly lowest, and ISME claims this could be due to uncertainty over the future of the Groceries Order.
More than one in four (28 per cent) of companies said labour costs were the biggest immediate concern for SMEs, followed by erosion of competitiveness (21 per cent) and economic uncertainty (15 per cent).
"While the results of the survey indicate a reduction in business confidence, employment prospects and investment on previous quarters, this, to an extent, is not surprising as the indicators from the previous surveys in the last 12 months were particularly positive and it would have been extremely difficult to sustain those levels of optimism and performance," the ISME said.
"It is imperative that at the very least, labour cost increases are brought into line with the EU average to ensure that our competitiveness is not completely eroded."