The engineering sector's competitiveness is at risk because of lack of investment in product development and wage pressures, a new report on the industry concludes.

The IBEC report, Engineering in Ireland: Economic Assessment and Strategic Issues, points out that although there has been unprecedented growth in the past three years, process and product engineering, research and development and assembly ability are not keeping pace with competitor countries.

"The importance of investing in a stream of products is also important to replace products in a portfolio which becomes obsolete over time," the report states. "This is increasingly important as product life cycles continuously shorten."

Every company needs to understand the external pressures on its business, carry out international competitor research and have an overall business strategy. The report also suggests that small to medium-sized enterprises, which do not have the resources to invest in product development, need to combine resources.

"Innovative methods of partnership, networks and intellectual property trading may provide a useful solution," the report states.

It also points out that wage pressures threaten the competitiveness of the industry, which provides more than 80,000 jobs directly and 50,000 indirectly, and contributes £55.4 billion (€70.34 billion) to GDP.

Hourly wage rates are about 10 times higher than those of the Czech Republic, Poland or Russia, although productivity levels are five times greater than those countries. "With the high level of new investment going into the engineering industry in these countries, significant productivity improvements are expected," the report states.

While recommending that a balance be maintained between productivity and costs, it states that "investing in people...underlies the superior performance of the market leaders".