Irish small and medium-sized companies are more optimistic and will invest more in training than their European counterparts, a new survey has found.

The Grant Thornton European business survey 2000 shows a net 63 per cent of ISMEs expect increases in turnover this year, 39 per cent expect increased profitability and 36 per cent expect to take on more staff.

However optimism is down on last year when ISMEs expected increases of 81 per cent, 59 per cent and 49 per cent respectively.

Just over half of small and medium-sized firms plan to increase their training spend this year. This is the highest figure of all 19 countries surveyed, 14 per cent higher than the figure for Britain and well above the European average of 38 per cent.

This represents an attempt by Irish firms to overcome the current labour market shortage, according to Mr Paul Raleigh, a partner in Grant Thornton.

He said: "Firms appear to be tackling the labour market shortages through a policy of increasing the competencies of existing staff and greater emphasis on retention."

He blames these labour market supply pressures together with growth fatigue for the reduced levels of optimism from last year.

Only in relation to research and development and advertising do Irish firms fall behind in the EU averages, with only a net 22 per cent and 20 per cent of ISMEs expecting to increase investment in these areas.

The survey shows Irish small and medium-sized firms are well above the European average in terms of investment in new plant and capital, investment in new buildings and increases in selling prices. These showed net increases of 45 per cent, 24 per cent and 21 per cent respectively. The survey found a healthier outlook in all areas of business expectation in the EU member states compared to last year. Just under 60 per cent of European small to medium-sized firms expect to increase turnover, 28 per cent expect profits to increase and 27 per cent expect employment to increase.

The most dramatic change is in Germany where 44 per cent of the companies surveyed expect turnover to rise compared with only 30 per cent last year. Positive predictions on employment rose from a net 16 per cent expecting an increase compared to just 4 per cent in 1999.

Mr Raleigh said: "We may well see Irish small and medium enterprises continuing on the crest of the economic wave if they can benefit from the opportunities that will undoubtedly arise from the increased business activity and optimism across Europe."

The survey also shows significant increases in business optimism in Britain with firms expecting turnover, employment and profitability to rise by 55 per cent, 25 per cent and 32 per cent. More than 6,506 companies responded to the survey from all the EU countries plus Switzerland, Norway, Turkey and Poland. The survey was carried out last October.