WHOLESALE losses on the world’s stock markets yesterday were the clearest possible indication of how bleakly investors view the prospects for businesses in the months ahead as national economies brace themselves for recession in the wake of the global credit crunch.

UK Chancellor Alistair Darling told the BBC that ‘It will be a difficult period, but I am absolutely confident we will get through it’.

In the Isle of Man, the Treasury minister warned that its forthcoming Budget could be the hardest for two decades as government sought to raise taxes to replace revenues hit by the slowdown.

That may well be expected – the Manx government has after all decided to spend up to £150m. of taxpayers’ money compensating investors hit by the Icelandic banking crisis and it clearly cannot lose that amount without a big impact on its public finances.

It is one reason why the Policy Council here, after a great deal of soul-searching, decided in favour of an industry-funded compensation scheme and of working to try to secure investors’ money via the banks’ host governments.

The general situation, however, is less one of when the recession hits but how bad it will be.

In answering that, yesterday’s retail price index figures were less than reassuring. While the headline figure of 5.8% was below what might have been expected, the underlying rate excluding mortgage repayments was a disturbing 6.4%, indicating the way that rising prices have been affecting island households.

That, and the talk of economic slowdown, will worry many but the fact is, if past recessions are any guide, that the majority will not be seriously affected.

Despite Landsbanki, Guernsey’s economy is strong and disposable incomes here are generally higher than in the UK so islanders are better placed to weather the storm.

In particular, the high-net-worth individuals and the corporations that the financial sector here relies on generally require more services and more security in times of market turbulence – not less.

What past experience has shown is that while we cannot escape recessions triggered elsewhere, the effects of them are not as severe and the island emerges stronger than before.