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Fund managers must prepare to move from defensive positions in order to make the most of plummeting stock prices, Richard Moore, fund manager for UK Growth fund for Santander Asset Management, has claimed.

Referring to the current market situation, Mr Moore said the UK Growth fund had taken a more defensive stance once the management was taken in-house back in July last year, but he said he was working on plans to buy good quality stock at a marked down price in the near future.

He said: "We are not, of course, going to go out there and go wild as the market is tough at the moment.

"However we are doing a bottom-up review of all potential assets. This is a careful approach and means we have to examine balance sheets and business models in order to ascertain which are going to get through this time.

"If you have a poor business model and high levels of debt then these are warning signs but we do have about 30 names already and we plan to take advantage of the current situation as soon as possible."

Regarding the question of a UK recession, Mr Moore acknowledged the UK sector was currently being squeezed and said market and bank values were not far off those in the 1990s.

He said: "The valuation of the market stands at comparable levels seen in September 1990, putting us near recession.

"It is, for this reason, we have remained so defensive sticking with commodities and food assets. However, as I have said this will have to change as many good stocks are trading at huge discounts. As with everything it is all about timing."

Mr Moore said unlike the 1990s, the UK is currently being hit by the dual impact of the credit crunch and inflation although he claimed the effects of the credit crunch had 'washed through'.

He said: "The real concern for us as fund managers of a UK regional fund is the issue of rising inflation. It destroys values and, in my opinion, the market will fall further as inflation continues to bite.

"In the 1970s the main concern was inflation and in the 1990s it was interest rates.We have had a bit of a double whammy. The markets will recover as they always do but it will take time and signs of recovery will be a while in filtering through."