Net immigration of more than 12,000 workers every year for the next 10 years will be needed to meet labour demand, according to a new survey carried out by Amarach consulting for AIB.

Three-quarters of the 160 managing directors of small and medium enterprises (SMEs) surveyed said they would employ more staff in five years time and the survey showed the services sector would see the greatest demand for staff with employee retention becoming an increasingly important issue.

The author of Business 2010, Mr Gerard O'Neill, said many SMEs were going to invest in training to improve skill levels of staff because it was cheaper than recruiting new staff. They would also offer more incentives and rewards to convince existing employees to stay.

The survey showed spending by Irish businesses on training would double over the next 10 years.

Mr O'Neill said the survey showed that Irish SMEs would have to look at combating continuing labour shortages by improving the productivity of workers.

The report concludes that, with continuing economic success coinciding with a sharp decline in the number of young people entering the workforce, retaining staff and improving their skill levels would be increasingly vital.

Mr O'Neill said that some firms were even buying up property to let to new employees to make it more attractive for prospective recruits.

The survey concluded that the Republic was only at the half way stage of its economic development and any notions of bubbles bursting should be ignored.

The report predicted that Irish exports would double by 2010, 70 per cent of which will be to euro-zone states. Mr O'Neill said new sources of profits from SMEs would come from services not products. He also predicted that, by 2010, 20 per cent of sales by Irish firms would occur via e-commerce.