IRISH BUSINESSES remain reasonably confident about their own performance despite a sharp turnaround in the last three months in their perception of the economy as a whole.

The IIB Bank/Institute of Chartered Accountants in Ireland (ICAI) Business Sentiment Survey published this morning finds a marked difference between firms' view of their own prospects and their assessment of the economy as a whole, where 79 per cent of respondents are less optimistic than they were three months ago. Some 54 per cent of respondents reported flat or increasing activity, while 42 per cent feel their company's performance will not reflect the broader economic prospects.

"While the survey confirms a clear slowdown in Irish economic growth is under way, it also highlights a number of more positive elements that risk being overlooked in the current gloomy climate," said ICAI communications director, Ronan O'Brien. "More than half of Irish firms reported stronger or stable conditions of late." The survey found the tighter job market "reflects less hiring rather than more firing". Just 31 per cent of firms said their payroll costs had fallen during the quarter - twice as many as those which had seen increased employment.

Rising costs remain one of the main concerns. Two-thirds of companies reported increasing costs. Just 5 per cent said they expect to be able to pass on the majority of the increase by putting up prices.

The credit crunch and higher energy costs are the issues of most concern. "The consequences of the credit crunch on the broader Irish economy are likely to be amplified considerably by a weakening in cash flows for many businesses as a result of softer sales and notably higher costs," said Austin Hughes chief economist at IIB Bank and author of the report.

Most firms expect the current economic slowdown to last for some time. Fifty-eight per cent said they expect the downturn to last between one and two years with a further 24 per cent expecting it to last even longer.