In a speech to Tynwald on Thursday, Allan Bell, treasury minister, said his aim was to position the Island as the premier jurisdiction for space activities and the automatic first choice for space companies - a 'Switzerland of space.'

The money will be spent on marketing the industry in a two year campaign aimed at maintaining existing business and attracting further significant new business.

Mr Bell said: 'We now find ourselves in a space race of our own. An increasingly volatile and aggressive race with other jurisdictions to compete for this very lucrative economic sector. The monies will be spent on a fully integrated and co-ordinated marketing campaign and will include specific expenditure in areas such as web site development, brochures, advertising, sponsorship, speaking events, conferences, exhibitions and targeted visits.'

The space industry represents around $123bn gross annual turnover, generated by only 60 companies. The majority of this is generated by the satellite communications sector - with four such companies already operating from the Isle of Man.

Mr Bell emphasised the importance of the sector, emphasised by the competition between jurisdictions.

He said: 'If we do nothing, we will lose the business we already have to a growing number of competitors including Bermuda, Cayman, Gibraltar, Luxembourg and Singapore. These jurisdictions are committing increased financial and personnel resources to develop their satellite industries.

We cannot take continued economic growth for granted and yet without that growth, we cannot maintain our goals of full employment and buoyant government revenues for public services.'

The Tynwald approval was welcomed by the Island's director of space commerce, Tim Craine. He countered criticism that the money could be better spent on public services.

He said: 'Tynwald will see a major return on investment many times that which has been approved. Within two years I would like to see the Island having reached a critical mass of clustering, in the space and satellite industry and have an international reputation as a prime jurisdiction.'

The space tourism sector is also of growing importance, following the high-profile launch of Richard Branson's space travel company Virgin Galactic. Mr Bell said a 'significant announcement' was due on this within the next 10 days. The space travel market is currently worth around $500m.