During his speech, James Brokenshire said he would legislate for a budget if the Stormont Executive was not formed in October.
At the party conference, he said that his message to parties was “now is the time to reach agreement”.
Responding to his statement, Mr Eastwood said: “Here we are again, another warning from the Secretary of State that if the political deadlock isn’t broken, then he will have to step in and set a budget. If we arrive at that point, we will have arrived at the unforgivable point of complete and utter failure on behalf of the DUP and Sinn Fein.
“Let me be very clear, the SDLP rejects entirely any return to British direct rule.
“If the constant mantras of Sinn Fein and the DUP about their commitment to power sharing are to have any meaning at all, then they must prove their opposition to a return to direct rule by reaching an agreement to restore power-sharing.
“The warning words from Mr Brokenshire today should serve as a wake up call to both parties.
“If there is political will to return to the Assembly and to deliver real equality, including economic equality, then now is the time to do it. We are well past the time of giving them some breathing space.
“After 10 years of government together where neither party delivered on economic rights or language rights, now is the opportunity for Sinn Fein and the DUP to prove if they are either up for the job or they are not.
“Their failure in the last Assembly to set a budget has already left our public services at crisis point. Now, we are expected to just sit by and allow the British Government to set our budgets – a British Government under the thumb of the DUP. That is unacceptable to the SDLP.
“There is no more time for their slogans and stand-offs. It’s time to get back to work,” added the Foyle MLA.