A new State agency combining the functions of Forbairt, the Irish Trade Board and part of as, FAS, could be established before March, if approved by Government this month.

The agency, which will have overall responsibility for the development of Irish-owned businesses, will be empowered to deal with enterprise development, marketing Irish exports and innovation and technology, The Irish Times has learned.

A spokesman for the Department of Enterprise, Trade and Employment, yesterday confirmed that a memo would be brought to Cabinet later this month that would make proposals on how best to support the indigenous sector. But he refused to elaborate on its contents.

Industry sources suggest, however, that the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, will recommend the establishment of a new agency and will move quickly to set it up. The creation of a new agency follows months of speculation of a possible merger between Forbairt and the Irish Trade Board after a review group highlighted substantial overlaps in their functions. The review group has also recommended the transfer of the industrial training division of FAS to the new agency.

The Tanaiste's proposals are expected to be put to the Cabinet towards the end of January and, if approved, could clear the way for the creation of the new body within a couple of months.

Informed sources suggest that, subject to approval, the Government would seek to appoint a steering group made up of officials from the Department and executives from the three State agencies, possibly chaired by Department official, Mr Michael McKenna, who headed the review group.

There would also have to be consultation with the trade unions, primarily SIPTU, with some job losses expected over time. Between them, the Irish Trade Board and Forbairt employ around 1,000 people. Any redundancies are likely to be sought through a voluntary severance package, introduced on a phased basis.

Forbairt's 670 staff are divided between three buildings in Dublin and eight regional offices. The trade board is based in Sandymount in Dublin with regional offices across the State.

The consolidation of the State agencies' functions will receive a mixed reaction from business. The Irish Small and Medium Enterprises Association has lobbied for the establishment of a single industrial support agency. But the Irish Exporters' Association has said it would prefer to see the continuation of a single body directly responsible for international marketing.