Irish business leaders have called for a 1bn euro (£890m) EU state aid programme to protect Irish firms in the event of a hard Brexit.
The Irish Business and Employers Confederation (Ibec) said that if Britain left the customs union, it would “massively disrupt” trade, leaving Irish firms “exposed”.
It said the cash would help firms trade through “any adjustment period”.
It also urged the EU to take a softer line on the UK in Brexit negotiations.
Britain is Ireland’s largest trading partner, with business between the countries supporting 400,000 jobs and generating 60bn euros, according to the British Irish Chamber of Commerce.
But Ibec, which represents 7,500 Irish businesses, said the relationship was at risk as the UK government headed towards an “economically calamitous Brexit divorce” by quitting the customs union.
“If the UK insists on such a policy of self harm, a long transition period that maintains existing trading rules will be needed to allow companies time to adapt,” chief executive Danny McCoy told senior EU policymakers on Wednesday.
He said that any new trade deal must recognise the “unique economic and political challenges that Brexit presents to Ireland”.
This would need to include provisions on travel and labour market rights, while also addressing the challenges presented by a potential customs border on the island of Ireland.
Mr McCoy urged the EU not to punish the UK, calling on it to restate the ‘New Settlement’ offer of revised EU membership terms made to the UK before the referendum.
This offered the UK the power to limit some EU migrants’ benefits and also included a treaty change so the UK would not be bound to “ever closer union”.
He also said the EU needed to show Britain that revisiting the Brexit decision “remained attractive and feasible”.
In the event of a “fraught exit”, he said a temporary EU state aid framework would be needed, as was the case after the financial crisis.
He said 1bn euros, spread over three years, would help Irish firms to “innovate, diversify into new markets, train staff and invest for the future”.
“The task now is to minimise the risks,” said Mr McCoy. “But we need to forge a new, positive relationship with the UK, and business will support these efforts.”