Midland farmers fear financial devastation as a new foot-and-mouth outbreak sent the industry into crisis yesterday.

Farms and cattle markets preparing for the height of the livestock sale season instead face the prospect of losing millions of pounds and the death knell for some businesses.

A nationwide ban on livestock movements was imposed last night after the discovery of a foot-and-mouth outbreak at a farm in Egham, Surrey. Vets were also testing for the disease at a farm in Norfolk.

It comes just a week after the Chief Veterinary Officer Debby Reynolds declared: "I'm satisfied that foot-and-mouth has been eradicated from the UK in 2007," following August's outbreak at another farm in Surrey.

In that instance, the Pirbright site, which houses the Government-funded Institute for Animal Health and pharmaceutical company Merial Animal Health, was identified as the source of the virus.

The latest outbreak coincides with the announcement from Birmingham law firm Clarke Willmott that it plans to pursue legal action for compensation, which could run into millions of pounds, on behalf of claimants hit by the August crisis.

Farmers last night voiced their anger at the Government. David Morgan, chairman of the West Midlands Livestock Board, saying: "The whole scenario with the Government has been absolutely farcical.

"They told us there had been a mistake made, but that they had come in and made it alright.

"Farmers were relatively understanding, but then it all happens again, and you are just left speechless. This is the death knell for us."

Mr Morgan, who owns a cattle farm in West Herefordshire, said the movement ban came as sheep were being moved to breed, and cattle were generally sold on at markets.

"We're now in peak breeding season, peak sales for new sheep flocks and peak cattle sale times," he said.

"This outbreak has the potential to disrupt the entire season."

A spokesman for the NFU in the West Midlands said August's movement restrictions had cost the cattle industry "tens of millions" of pounds and a significant part of those losses had been borne by farmers in the region.

He added that as well as those losses, farmers were still struggling to cope with the devastating effects of the summer's heavy rains and floods.

Nigel Misslebrook, a partner at Chase View Vets in Ross-on-Wye, Herefordshire, said many of the farmers he had spoken to yesterday were resigned to further big losses.

"I think there's this sort of resignation because they can't do anything about it, and also because it started from a Government facility, which makes them bitter," he said.

"Farmers want to know how it could have happened at a Government lab, which seems to be the case here."

Livestock auctioneer Clive Roads, of McCartneys in Worcester, said they had to miss five cattle auctions while the last livestock movement ban was in effect, and had only held two since then.