Irish businesses remain optimistic about their future prospects, but are concerned about rising costs.

The latest IIB Bank/Institute of Chartered Accountants Sentiment Survey found that six out of 10 firms reported stronger activity in the past three months, while only one in 10 has seen business levels drop. Moreover, two out of three companies expect activity to strengthen further in the next three months, compared with only one in 14 that expect business to slacken.

Pat Costello, chief executive of the Institute of Chartered Accountants, welcomed the findings, saying they angered well for the longer term outlook of the Irish economy.

One of the key discoveries, he said, was the strengthening of the job market. "An astonishing 38 per cent of companies say they have increased employment levels in the past quarter," he said. "This is roughly three times the number of companies reporting lower employment."

Still, life is not all rosy. Four out of five firms experienced higher costs in the past quarter and two-thirds expect higher costs in the coming months. John Reynolds, director at IIB Bank, said in the light of the fact that energy prices have eased recently, it is particularly worrying that so many companies expect further cost increases.

"Looking further ahead, it seems that infrastructure and immigration will be key issues for the Irish economy in coming years," he said.

On the issue of immigration, Irish companies are generally positive, with the vast majority saying the influx of foreign nationals has eased bottlenecks in the economy. One in three firms see immigration making a major contribution to sustaining strong economic growth, while only 3 per cent feel it increases risks to the economic outlook.

Three-quarters of businesses believe the upcoming election is important to the country's economic prospects, with 42 per cent saying the most damaging policy that any incoming government could implement is higher taxation. A quarter of those questioned believe a scaling back of infrastructure spend would be the most negative policy option.

Three out of four firms feel some political parties' policies could lead to a marked deterioration in prospects.