Higher insurance costs are the biggest threat to the survival of small business in Ireland according to research by the Small Firms Association.

A national survey has established that 92 per cent of small companies identified punitive insurance costs as a major cause for concern affecting the viability of the business and its ability to expand and create new jobs. This year insurance costs increased by 70 per cent for many companies. The SFA said it could identify 1,200 job losses that were associated with higher insurance costs.

"The spiralling cost of insurance is now costing the economy jobs and closing otherwise profitable companies," it said yesterday.

Labour costs were also cited as a further problem for business confidence. Other issues affecting the sector were late payments from debtors, inflation, skills shortages, traffic, increasing legislation, crime, road and rail infrastructure and the early payment of corporation tax, according to the survey.

The SFA said its research showed that the ability of the Irish economy to create new jobs was declining rapidly and that there would be a very significant downturn in employment creation in 2002. This will be the third successive year that small firms create less jobs than in the previous year, it predicted.

About half of those surveyed complained about traffic gridlock and the problems it was creating for businesses. The SFA carried out a series of deliveries over four months that showed it could take between 35 minutes to one hour and twenty minutes to make a delivery of over five kilometres.

Another problem facing the sector is the UK decision not to be part of the euro zone. Irish companies export more services to the UK than to all other 13 European Union member-states combined.