Irish small and medium firms (SMEs) are far more optimistic about this year's prospects for business, according to a new survey. It found that 81 per cent of firms here expect turnover to increase in 1999, while almost 60 per cent say profitability will rise.

A further 50 per cent believe employment will rise. The figures are well ahead of the average EU figures, which show EU countries expect turnover to rise this year by 49 per cent on average, while they believe profitability will rise by just 18 per cent, with employment rising by 21 per cent.

The annual survey was carried out by Grant Thornton International and found that 51 per cent of Irish small and medium firms expect to increase investment in new plant and machinery. This compares to 33 per cent last year. A further 21 per cent say they will increase investment in new buildings, down slightly on last year's figures, when 27 per cent predicted that they would increase investment in buildings.

According to Grant Thornton the initial survey results show that Irish firms' investment intentions are significantly ahead of the European average. "Only in research and development do we fall behind, with just 19 per cent expecting to increase spend on R& D compared with the European average of 20 per cent," it says.

Mr Paul Raleigh, partner at Grant Thornton, told The Irish Times that the level of optimism among Irish firms, was the most surprising factor in the survey. He said he thought most people would have been saying that they would expected some small growth in 1999, but not at the level of 1999.

Mr Raleigh said that in general, smaller countries such as Ireland, Belgium and Luxemburg, were optimistic, but the larger economies such as Germany, Britain and France were more pessimistic.

Germany was bottom of the league, with just 30 per cent of firms expecting a rise in turnover. Germany also came last for profitability expectations and second last for employment predictions - just under 5 per cent of firms expect a rise under these headings.

The survey was sent to more than 50,000 firms across Europe. Questionnaires were sent to 1,000 firms in Ireland whose annual turnover ranged from £1 million-£10 million. The response rate was 25-30 per cent in Ireland, according to Mr Raleigh, while overall more than 7,000 companies responded.