Weak international demand and intensifying competition, particularly from new production centres in Asia and Central Europe, have placed significant pressure on the engineering sector in Ireland, a new report says.

Published by the Irish Engineering Enterprises Federation (IEEF), the report warns of the threats facing a sector which employs 50,000 people, or 23 per cent of the manufacturing workforce, and boasts an annual turnover of more than €8 billion.

It notes that engineering enjoyed a period of rapid growth in 1995-2000 when employment grew by 30 per cent and exports rose to more than €16 billion from €5 billion.

But it added that the sector had seen a reversal of fortune in the past two years with 16,000 jobs lost while exports fell by more than 45 per cent.

"The general decline has been caused by a combination of weak markets and increasing competitive pressures," the IEEF says. "Increasing business costs in Ireland have exacerbated the competitive situation."

It warns that any further decline of the sector, which it describes as "an absolutely critical component of Ireland's manufacturing base", would pose a threat to the future performance of manufacturing in Ireland.

The report also outlines to facilitate the recovery and long-term viability of the sector. It suggests management development will be key, especially in the small and medium-sized enterprises that form the backbone of the sector.

It also urges that all possible steps be taken to facilitate firms' investments in new technologies, from design to production to management information systems.

Research and development incentives and supports should be accessible, the capabilities of SMEs should be actively marketed to larger manufacturing operations while skills supply and development should be examined across the board and appropriate measures taken. The report also notes that the issue of business costs needs to be addressed as it is paramount to the competitiveness of all Irish industry.

According to the IEEF, there are more than 1,200 engineering enterprises in Ireland, including 70 multinational companies. They are involved in a wide range of activities from industrial machinery and parts to electrical equipment and automotive components. The IEEF is a part of IBEC, the employers' lobby group.