Small Irish companies will be forced out of business if the Government fails to clamp down on the black market economy, business lobby group ISME says. Claire Shoesmith reports.

The high level of undetected black economy activity is "seriously threatening" the livelihoods of many small business owners around the State, the group said yesterday.

"Whether we like it or not, Ireland has become an expensive place to run a business and many companies are being forced into the shadow economy simply in order to survive," said Robert Berney, the group's chairman.

ISME maintains black economy activities account for about 11 per cent of gross national product - the value of goods and services produced in Ireland, plus those imported, less those exported - which is equal to about €13 billion.

Moreover, the group estimates that the amount of unpaid taxes alone is equal to about €2.7 billion, an amount the ISME says could be used to fund infrastructure and other State projects.

Mr Berney said that, unless the Government does something about it, the number of companies operating in the black economy will continue to increase. ISME called on the Government to review tax rates and the increase in public utility costs, to deregulate the labour market and cut red tape to deter firms from "going underground".

"While it is not to be condoned, the high-cost environment is a factor and is having a double effect for legitimate companies, who are faced with these costs and also have their businesses and livelihoods threatened by black economy operators who continue to undercut them," said Mr Berney.

ISME estimates business-related costs have increased by 30 per cent in the last three years.