The Republic is the best site in Europe for new pharmaceutical plants but is not among the leading economies in the emerging biotechnology field.

It will also face tough competition from former eastern European states following EU expansion in May, a new report states.

EU Enlargement - Driving Change in the European Life Sciences Industry also argues that Europe, as a whole, lags the US when it comes to innovation in life sciences - the sector for drugs, medical devices and a range of biotechnology products.

The report, published yesterday by Cap Gemini Ernst & Young, highlights the State's strengths as a location for life science projects, such as the availability of skilled labour and its low corporation tax rates.

The Republic is ranked fourth out of 28 European states in terms of the availability of skilled labour. Its ranking is behind Sweden, Finland and Belgium but ahead of competitors such as Britain and Germany.

The survey also lists chronic weaknesses in the State's transport infrastructure - in this area, it is ranked 23rd out of 28 states - and a relatively poor research climate for the life sciences.

The Republic is only ranked 10th in the survey for research, a criteria considered crucially important to attract biotech firms.

Overall, the report concludes that the State is grouped in the second-best category of states for biotechnology investments along with Germany and Britain. The Scandinavian states and the Netherlands are ranked highest.

For non-research pharmaceutical investments, the Republic is considered the best country to locate an investment. France, Hungary and Finland are also ranked best-in-class in this field.

Government policy is focusing on building up a research base to enable IDA Ireland to pitch for major biotechnology project but the survey says R&D activities will increasingly move eastwards following expansion of the EU.