The research laboratories -- one run by the government's Institute for Animal Health and the other owned by Merial Animal Health Ltd., a US-French company -- are located about five miles (8 km) from where the virus infected the cattle.

"The indications are that there is a strong probability that the (virus) strain involved in the farm outbreak originated from the IAH or the Merial sites," the report said.

"Release by human movement must also be considered a real possibility. Further investigation of the above issues is required as is being urgently pursued."

Both laboratories, which conduct research and develop vaccines against foot and mouth, handle the exact, rare strain of the virus that struck the herd, a strain isolated by British scientists 40 years ago.

The foot and mouth outbreak poses an immediate threat to Britain's livestock industry, whose meat exports are worth more than $1 billion a year, and the European Union has moved quickly to ban all British exports of fresh meat, live animals and milk.

While the investigators' report drew no definitive conclusions, pointing the finger at neither of the laboratories and not identifying how the virus was spread, it did say there was a limited possibility it was borne on the air, its most common form of dispersion.

It said it was unlikely that recent heavy floods in central and southern parts of Britain were responsible.

ECONOMIC DAMAGE

Two outbreaks of the disease have so far been confirmed, both in herds based near the laboratories, in the southeast of England near the town of Guildford, outside London.

Animals from both sites of infection have been culled and 3 km exclusion zones and 10 km protection zones have been set up around the farms and include the two research laboratories.

Roger Pride, whose family's farm was the first to report an outbreak, described how quickly events have travelled since last Thursday when his father noticed something amiss in their cows.

"They were drooling, saliva, lots of saliva coming out of both sides of their mouths," he said.

He notified a veterinarian on Thursday, the dreaded news came on Friday, and 64 of the cattle at his family farm in Surrey, southeast England were slaughtered on Saturday.

He said he was "shocked and devastated" when he was told his cattle had tested positive: "It felt as if our whole world had been turned upside down."

Prime Minister Gordon Brown, speaking on television after the report was released, pointed to the possibility that drainage system from one of the labs may have played a part.

"What they are looking at is the drainage facilities at the Merial laboratory," Brown said.

Friday's outbreak was the first in Britain since 2001, when the illness devastated the farming community. More than six million animals were burnt on vast pyres and the crisis cost the economy around 8.5 billion pounds ($17 billion).

To limit the spread of the disease, the government has banned the movement of farm animals nationwide -- a ban that may have a deep economic impact on farming.

Some Scottish abattoirs should be able to resume slaughtering livestock from Wednesday, officials said. All movement of livestock remains banned in England and Wales.

Economist Mark Miller from the HBOS bank said swift action would limit the damage but voiced concern the outbreak could have a negative impact on British economic output.