Irish companies are optimistic about their future prospects, but want to see a neutral budget next month that will not fuel inflation. Rising costs and labour shortages remain significant concerns for most businesses, according to a new survey.

Firms have seen a significant step-up in activity in the past three months, with half of those surveyed saying they had increased business levels in the past three months compared to only one in nine reporting a deterioration.

Business is expected to strengthen markedly in the next three months, the IIB Bank/Institute of Chartered Accountants Sentiment Survey found.

Two out of three companies expect stronger activity levels, with only one in 14 expecting weaker conditions. Jobs growth is also exceptionally strong, with 38 per cent of companies hiring against 11 per cent shedding jobs.

"The Irish rate of jobs turnover is roughly the same as the US, but the rate of jobs creation is three times that of the United States," said Austin Hughes, chief economist with IIB Bank.

However, labour shortages remain an issue. Nearly 27 per cent of firms reported difficulties hiring suitable staff.

Two out of three firms have also seen their costs rise in the past quarter, with one in seven reporting a substantial rise.