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In September 1601 a Spanish fleet anchored at Kinsale was besieged by the English. An Irish army from the north, which had appealed to the Spanish king to help it against the English, marched the length of the country to liberate the ships, but was defeated in battle outside the town on Christmas Eve. For the Catholics, the immediate consequence was that they were banned from Kinsale; it would be another 100 years before they were allowed back in. Historians now cite 1601 as the beginning of the end of Gaelic Ireland.

After 1601 the town developed as a ship-building port. In the early 18th century, Alexander Selkirk left Kinsale Harbour on a voyage that left him stranded on a desert island, providing Daniel Defoe with the idea for Robinson Crusoe.