More than 70 per cent of small firms could face temporary closure because they have not planned properly for Y2K, a new survey has found. It also puts the cost of compliance at £400 million.

The survey was conducted by the Small Firms Association (SFA) in association with the ESB. The SFA is now calling for a £10 million fund for small firms to tackle the issue and has urged the Government to allow them a two-year tax write-off on expenditure associated with Y2K.

The survey found that 71 per cent of the Republic's 160,000 firms could face temporary closure because they have not put contingency plans in place in case their systems or those of their key suppliers fail because of Y2K problems.

"While the research suggests that the preliminary preparations being carried out by small firms for Y2K are well underway, there are strong indicators that many small businesses are tinkering at the edges of the Y2K problem," it says. "A high percentage of small companies understand the business issues relating to Y2K, have put in place a plan and appointed a senior person to co-ordinate the preparations."

The survey found that when more "in-depth questions" were posed it would seem that although the business issues are understood "awareness is very high and a plan has been put in place, a much lower percentage of companies have acted on this awareness and put the plan into practice."

The survey found that 93 per cent of companies said they understood the business issues relating to Y2K. And 82 per cent replied that they had appointed a senior person to take charge of the company's action plan.

"With regard to seeking Y2K advice from experts in the legal, financial, insurance and health and safety fields, in the majority of cases companies had not contacted any of the above experts," the SFA said.

According to SFA chairman Mr Kieran Crowley, "this contact is central to any sound Y2K compliance plan and yet only 29 per cent had contacted their legal adviser, 39 per cent their insurer, 43 per cent their accountant and a mere 23 per their health and safety expert."

The SFA said a three-step plan of action should be taken, including allowances in this year's Budget for a two-year tax write-off for Y2K capital expenditure incurred by small firms. It said the Government should also fund what it termed a "Bug Busters" mentoring programme, aimed at mobilising small firms to become Y2K compliant. It added that a £10 million fund aimed at giving one-to-one advice to small firms should be established.

Mr Crowley said that if action is not taken, then "the doomsday scenario of company closures and job losses will become a reality."