Small business will have its best year ever in 1998 as a result of continuing low interest rates, low inflation and the recent reductions in corporation tax, the Small Firms Association (SFA) has said.

In 1997 the sector created 51,000 jobs, according to the SFA, and it expects this to be exceeded in 1998, but only if problems with recruiting staff are addressed.

It claims 78 per cent of its member companies are experiencing difficulties in finding people willing to take up jobs.

"Many owner managers who contact the SFA say their greatest competition for new staff is the social welfare system. In a country with massive unemployment levels a continuation of this situation is inexcusable," said SFA director, Mr Brendan Butler.

He said the "punitive" levels of PAYE/PRSI means many employees are unhappy with their take home pay and the unemployed often have no incentive to take up a job.

Despite this, Mr Butler said 1998 would see small firms on a "strong growth curve", involving thousands of new jobs, and that confidence was at an all-time high.

He said despite the promised easing of the administrative burden on small firms over the next year, business taxes remain a "significant problem" and further measures would be needed to reduce the small business rate of Corporation Tax.

Meanwhile, IBEC believes 1998 will be a year of great challenges which will be shaped by the State's ability to deal well with a range of decisions, according to its director general, Mr John Dunne.

Mr Dunne, in a New Year message, said that with EMU entry rates to be decided in May, the position of Britain demanded that competitiveness requirements be seen to be paramount.

He said the Government must constantly control public spending.

Decisions must also be made at micro level in every workplace to respect the consensus approach which had been such a vital part of Ireland's success.