British dairy exports like cheese, butter and skimmed milk powder are at their most competitive since the mid-1990s, due to the weaker pound.

This is also good news for the 3-4million tonne exportable surplus of wheat, barley and oilseed rape, suggesting export homes could be found without unduly pressuring domestic ex-farm prices.

Oil prices, too have weakened considerably, dropping back below $95/barrel, raising the prospect of falling energy bills and fuel costs.

Those were the positive messages from HSBC economist Mark Berrisford-Smith’s assessment of the current economic picture at today’s Dairy UK conference at Stoneleigh, hours after major US investment bank Lehman Bros slid into financial disaster and world share markets slumped.

But while he included some encouraging signals for farmers, his picture of the broader economy was that worse was still to come. “The significant factor is not that Lehman Bros failed, but that it was allowed to fail.”

“If you are a big investment bank now, you need protection from a bigger bank with a retail base. The appetite of government’s to help out financial institutions has been found wanting.”

The US and UK economies faced at least two years of continued difficulty, exacerbated by a financial system that was now in disarray, he said.

Nor was the strife restricted to the UK and America. “Eurozone economic performance was worse than ours – it shrank – in the second quarter of the year.”

The prospect of recession was now a reality for the British economy but conditions were not as severe as previous slumps. “This is not 1974.”

The falling oil price suggested inflation may be beginning to com under control, freeing up the Bank of England’s monetary policy committee to begin making interest rate cuts. Such a move could come as early as October, Mr Berrisford-Smith said.

“Inflation could fall more quickly than some expect, and base interest rates could fall as low as 4% by this time next year – or even as low as 3%.”

However, this did not signal a return to an era of cheap, easily available credit, he said. “Given the state of the banking sector, money is going to continue to get more expensive.”

Read more from the Dairy UK conference