The Small Firms Association has warned that the erosion of the cost competitiveness of Ireland's 186,000 small businesses will have dire consequences for employment next year.

In its end-of-year statement, SFA director, Mr Pat Delaney, said that an average of 490 jobs were lost in the Republic every week in 2002 and has stressed that urgent action must be taken to safeguard employment.

"Many small companies have had to engage in drastic cost-cutting measures in an effort to survive the economic downturn. Spiralling labour costs, insurance and energy costs, have all played their part in putting increased pressure on business survival," he said.

The association expects further job losses and weakening business confidence in 2003 and suggests that the outlook for job creation is particularly poor, with the ability of small companies to create jobs at an eight-year low.

The manufacturing sector has been hardest hit, with 9,981 job losses, equivalent to 42 per cent of overall redundancies.

The metal and engineering sector was also adversely affected, with job losses also in the banking, financial and insurance sectors and transport and communications.

A regional comparison reveals that more than 51 per cent of all jobs lost last year have been in the greater Dublin region with Cork and the Mid-West also suffering severe job losses.

"What is particularly concerning about the current high levels of redundancies is that our ability to create new jobs to compensate for these losses has also been severely damaged by losses to competitiveness in recent years," Mr Delaney stated.

The SFA believes that unrealistic wage expectations, the increase in the minimum wage, and insurance and energy increases have already led to significant job losses and reduced employment growth. "2002 was a difficult period for employment, featuring substantial job losses and consolidation, and this pattern is likely to continue into 2003."