Ireland could be facing an even bigger recession than the one it has just come through as a result of Brexit and a potential downturn in the world economy, Fianna Fáil leader Micheál Martin has warned.
In an address to the Small Firms Association (SFA), Mr Martin said both threats represented a “defining moment” for the State and its economic model.
“This is not about a conventional economic shock but a direct challenge to our core economic system.”
Mr Martin warned that without a credible response Brexit could result in hundreds of business closures and thousands of jobs losses as well as lower investment in infrastructure and weaker public services.
He highlighted a recent report by the Economic and Social Research Institute and the Department of Finance, which forecast a possible €12 billion loss to national income from a hard Brexit scenario with Britain exiting the single market altogether.
Aside from Brexit, Mr Martin said many countries were now turning their backs on the sort of trade co-operation that smaller countries such as Ireland were reliant upon.
“As for the impact of last week’s US presidential election, it is very brave person indeed who can predict what American policy will be next year let alone in four years’ time,” he told the SFA’s annual lunch event in Dublin’s Mansion House.
Mr Martin said Ireland’s basic economic strategy was no longer sustainable and that Ireland’s economic base needed to be broadened with a particular emphasis on indigenous companies.
In his address, the Fianna Fáil leader also spoke of the threat to public finances from union pay demands. While union leaders had been forthright in sounding the alarm over Brexit they were were less cognisant of the fragile state of the public purse, he said.
“We need to step back before the pay situation gets out of hand. Surely after what we have just been though, an angry, relativities-driven escalation of industrial disputes is that last thing we need?” he said.
Also addressing the event was outgoing SFA chairman AJ Noonan, who warned Ireland may lose out in the race to attract UK businesses here in the wake of Brexit because of the “punitive” tax regime.
“In terms of Brexit, the current message we are sending as a country is ‘relocate to Ireland and pay more tax’ – not a winning formula,” he said.
“Our tax system is not working for owner-managers, our employees and our future prospects,” he said, suggesting some elements of the political system were too obsessed with the redistribution of wealth by taking more from those in work.
