THE Small Firms Association has claimed that despite the economic boom, many of its members are increasingly earning smaller profits.

A survey of 236 small companies by the SEA found that these firms attributed the profits squeeze to intensive competition, high taxation and spiralling labour costs.

Around 16 per cent of companies said that high labour costs represented the biggest threat to the growth and survival of their businesses.

Up to 15 per cent of those surveyed attributed smaller earnings to increased competition, both from legitimate competitors and from those operating within the black economy.

While 9 per cent of those surveyed said the levels of personal and corporate taxation were still too high, despite recent changes in the Budget.

SFA assistant director, Mr Pat Delaney, said the results showed that the ability of small companies to remain competitive and profitable was being "severely tested" at a time when the economy was performing strongly.

"It is incumbent on policy makers to be concerned that many small companies are finding it increasingly difficult to fill vacancies because of the level of taxation, skills gaps and the availability of alternative employment in the black economy for some workers," according to Mr Delaney.

He urged the Government to show a "more earnest" approach to creating an environment where people would take up legitimate work.

This could only be achieved by ensuring that workers take home pay was higher than social welfare payments, he said.

"Otherwise we will lose a great opportunity to create sustainable long term jobs."