We are facing ’rough and rocky’ economic times in the next nine months, the Treasury Minister has warned.

Alfred Cannan will give a Budget update in Tynwald next week when he will set out plans to support the Manx economy in the short to medium term.

Mr Cannan expects unemployment to increase when the government’s current support schemes come to an end.

He said: ’It’s only when you take these plasters off the economy you start to properly understand what we are left with.

’We are expecting higher levels of unemployment - quite how high is yet to be determined. But we need to prepare for a rough and rocky road ahead in the short to medium term.’

Mr Cannan said it was difficult to assess the direct economic impact of the Covid-19 lockdown.

’We are still providing direct salary support to businesses but we’ve spent less than we had envisaged and the economy is back more quickly than expected,’ he said.

Mr Cannan said the impact on the domestic economy was easier to see but more difficult was the border lockdown’s effect on the outward-facing economy - the finance sector including insurance and banking, and manufacturing.

Financial services accounts for an estimated 30% of national income and digital/e-gaming 21%.

The Treasury Minister said: ’We are facing an uncertain period. It’s not clear what the impact on revenue will be.

’We are facing potential redundancies and higher levels of unemployment not just because of the support schemes coming to an end but because of the global picture.’

He said large parts of our economy are interlinked with the UK.

’In the past we’ve been relatively resilient and escaped recession when it has hit the UK and despite the difficulties ahead I remain confident in the core strength of our economy,’ he said.

Another impact on revenue will come from the UK Chancellor’s decision to cut VAT from 20% to 5% for tourism and hospitality for six months, a move to be mirrored here.

The Treasury Minister said he welcomed the boost to the hospitality industry this will bring and calculations of its revenue impact will form part of the overall Covid-19 assessment to be brought before the main Budget in February.

Mr Cannan said that next week’s update would not be an extensive full budget but would aim to lay the framework for what the government plans to do to protect the economy.

Tynwald will be able to vote on departments’ spending allowances.

Various scenarios have been considered but Mr Cannan said the public finances would be able to cope in terms of assets and reserves.

Mr Cannan will also be asking Tynwald to support additional borrowing of up to £250m should it be needed, a move that he calls a prudent measure in the circumstances.

Enterprise Minister Laurence Skelly has already announced an extended package of support for the hotel and tourism sector.

And it is expected that Mr Cannan will outline a significant package of support for the broader economy, which is expected to be funded from reserves.