RISING COSTS remain the number one concern of Ireland's multinationals, according to a new survey, which also reveals that a third of responding companies intend to reduce their employee numbers over the coming year.

The Irish Management Institute/National Irish Bank Survey of Multinationals 2008, which received responses from 142 multinational companies based in Ireland, shows that of the top 10 factors of most importance to Ireland's competitive position, five relate to the cost of doing business in Ireland - including wage costs, the rate of inflation, energy costs, corporation tax and non-labour costs.

The chief executive of IDA Ireland, Barry O'Leary, who launched the report yesterday, expressed a measured sense of optimism when he said that even though some individual companies were under pressure, a considerable amount of expansions remained in the sector, as well as new companies which were coming to Ireland.

"Even in difficult times, there is still a lot of foreign direct investment to fight for," Mr O'Leary said, adding that the Government agency was on target to increase its projects this year.

However, he did concede that costs were a major issue for multinational companies, citing the recent example of Tyco, which is to move its Cork operation to Mexico because of rising costs.

China was identified as the biggest low-cost threat to Ireland's international competitive position, with India seen as a close second, followed by countries in eastern Europe, while the majority of respondents identified more than one country as a threat.

Forty-three per cent of respondents declared that the global credit crunch has had "no impact" on their Irish operations, although given the time-lag in publishing the report, this is likely to have increased since.

Of those who said that it had affected their business, most said that it had led to reduced growth rates and a reduction in sales.

The IMI/NIB survey also gave further evidence that Ireland's multinationals are "moving up the value chain", with more than two-thirds reporting that the Irish aspect of their operation was strategically important to the global performance of their parent company.