The small firms sector remains upbeat on prospects for job creation and revenue in 2006, but anxiety persists about oil prices and growing competition.

A survey of Ireland's small and medium sized enterprises, undertaken by mobile services company O2, shows that almost one in three (31 per cent) of the firms surveyed expect to increase employment in the coming year. Only 3 per cent of firms expect to cut staff while over two in five firms (42 per cent) reported current difficulties in finding staff. More than half (56 per cent) of firms surveyed expect their revenues to increase, with only 3 per cent expecting a disimprovement.

"There is probably a feel good SSIA factor feeding into confidence levels, with one in three firms more confident about 2006 than they were in 2005 - itself a good year," said O2 Ireland marketing director Mr Paul Farrell.

One in four firms (24 per cent) said that increased competition was their greatest challenge in 2006, while half of firms (51 per cent) said that oil prices had affected business in 2005.

Survey evidence also suggests that owner-managers are less confident in the property market than before. Three in five (61 per cent) owner-managers and directors said that they would invest extra cash in the property market, compared with 68 per cent in last year's study.

There was a corresponding rise in those saying that they would invest in equities - up to 10 per cent, compared with 7 per cent one year ago.

"Perhaps the publicity surrounding the National Pensions Review and ESRI warnings on the dangers of a property bubble may be starting to have an impact," Mr Farrell said. "But there is little doubt that property remains the primary asset class of choice among Irish owner managers and directors."

Some 32 per cent of owner managers have no personal private pension scheme, according to the survey.

"At first sight, this appears a high number, but it is possible that some of these have property assets. It is also possible that many owner managers in small and medium sized businesses cannot afford a pension and are putting any spare cash back into their business," said Mr Farrell.

The O2 survey on the small and medium sized market is conducted annually by TNS mrbi. Random interviews were conducted with owners, directors and managing directors of 300 businesses with less than 250 employees, with selected firms stratified by region and size.