Schroders' Buxton claims opportunities exist despite pessimistic outlook

Mr Buxton, head of UK equities, said that while the current outlook was pessimistic, in a few years' time, people will look back at current values and realise there were opportunities to be had.

He said: "We are slip-sliding into recession as we speak, and it's clear things have taken a further step down in recent weeks, with oil prices going up and the sector now clearly being in a bubble.

"The market could justify $95 a barrel last November, but not the current price. Until that bubble bursts, people can still see a way out. But things will get worse."

According to Mr Buxton, now is the time to get involved with a number of undervalued UK companies.

He said: "Some companies are at the sharp end of the consumer slowdown and grossly undervalued, but they have very strong balance sheets and will weather the storm - companies such as clothing manufacturer Next, which has survived other downturns - and British Airways.

"BA is currently loss making, but it can survive. Smaller airlines are currently going bust, so they will be in a much stronger position post-downturn, as some of the competition will be wiped out.

"Valuations are now too low, and people will look back in two or three years with the view that now was an amazing time for bargains."

Mr Buxton said he was heeding his own advice and adding companies such as Next and Rolls Royce to his portfolio. He added that, while things will be tough for the next 12 months, the recent acquisition of Alliance & Leicester by Santander provided a glimmer of hope.

He said: "We will look back and say the deal was a positive step for the market, as not many banks are in acquiring mode. Santander is paying book value, and this not only provides some hope of a floor for valuations, it also appears to mark a crucial step in the overall healing process."