EXPORTS by indigenous Irish manufacturing and service firms increased by 10.4 per cent to £3.7 billion last year, according to An Bord Trachtala/the Irish Trade Board (ABT).

Exports to continental Europe, rose by more than 17 per cent to £1.15 billion, but the growth in sales to the UK market was markedly slower at a mere 5.8 per cent.

Launching ABT's annual review and outlook, the Minister for Tourism and Trade, Mr Kenny, caused consternation among lobby groups with his assertion that coping with unfavourable exchange rates was a matter for business rather than Government.

ABT said the sluggish growth in sales to Britain and Northern Ireland, which were worth £1.67 billion last year, was due to a combination of stiff competition, the pound's strength against sterling and slower retail sales.

Exports to North America, which are mainly industrial goods and up market consumer products, increased more than 13 per cent to £340 million. Sales to eastern Europe, Asia/Pacific, the Middle East and other world markets increased by almost 16 per cent to £417 million.

Over the next five years, ABT believes, indigenous Irish firms can increase their exports to £8.2 billion.

To meet this target, sales to continental Europe will have to treble to £3 billion, while exports to the UK will have to double to £2.8 billion.

ABT, which has a budget of about £43 million, has 23 overseas offices including three in Britain 13 in continental Europe, and five in the Pacific Rim.

Mr Kenny said he wanted the agency to continue to concentrate its efforts on continental Europe. Ireland's dependence on the UK should be reduced by 2 per cent a year over the next five years, according to Mr Kenny.

He said the Government and ABT did not want exporters to cut back on sales to Britain and Northern Ireland, but rather reduce their dependence on that market. Such a course of action was "common sense", according to the Minister.

In relation to the exchange rate with sterling, Mr Kenny said that while the Government was aware of the difficulties the exchange rate was creating, "it must remain the responsibility of business itself to cope with currency and other fluctuations in the market place".

ABT has established a special market team to assist companies experiencing currency related problems in the UK, and the Minister said that this group would try to increase firms' overall exports and lower their cost base.

However, Mr Kenny said there was "no question of introducing another Market Development Fund by that or any other name".

The Minister's comments attracted an immediate rebuke from both the Small Firms Association (SFA) and ISME's exporter group IREX.

SFA director, Mr Brendan Butler, described Mr Kenny's stance as "an abdication by Government of its role in supporting business".

Mr Butler said that companies were not asking for a handout, but rather a recognition that many burdens placed on the small business sector which make it uncompetitive vis a vis the UK.

Mr Frank Mulcahy, of ISME's exporter group, IREX, said the Minister was attempting to "pass the buck on the sterling problem". He said the Government was artificially setting the exchange rates with sterling and the deutschmark and could not "wash its hands" of the impact it was having on certain sectors of Irish firms.

The employers organisation IBEC said it welcomed the continued focus on Europe, but complained that the Government had no coherent trade policy to promote Irish goods and services abroad.