The attack on Lashkar Gah is the first time that the Taleban have attempted to push inside the well-defended provincial capital. The operation was an attempted “spectacular”, a Taleban tactic culled from the insurgents in Iraq and aimed as much at psychological impact as military success.

However, it remains to be seen whether they have succeeded in their psychological objective, which is trying to convince the local population that British and Afghan forces cannot defend them and bring security. Both sides will feel they furthered their claim on Saturday night.

In the long term the impact on the views of the local populace could be more important to the Taleban than the loss of 100 fighters.

The Lashkar Gah attack comes against a backdrop of increasingly complex instability in Helmand, in which Taleban-inspired violence is mixing with the actions of the narco-mafia and other criminal forces.

Saturday night's operation was helped by the Taleban seizure of Marja and Nad Ali district west of the city in September.

British military officials claim that the area was deliberately ceded without a fight by powerful drugs mafia warlords who control the ostensibly pro-government militias manning local checkpoints. The Taleban have since promised to protect opium farmers in the area from government eradication.

In a measure of the seriousness with which the Western military sees the nexus between the Taleban and the drugs mafia, on Friday Nato officials agreed to new rules that will allow Western forces to specifically target drug smugglers and refinement labs for the first time.

The Taleban are believed to make $100 million per year out of tax and protection money from the Helmand narco-industry.

"It is in their (the drugs mafia's) interests to provoke sufficient insecurity and instability to create a situation where counternarcotics can't take place," said one British military source.

Western officials also believe that the strategy serves the wider interests of the narco-warlords, several of whom were sacked from provincial government office at British insistence in 2005 and have since been agitating for a return to power.

"This undermines the authority of the Helmand Governor and reinforces their claim that their tribal connections and patronage are what is necessary to control Helmand," said the source.

The Taleban have made a number of attempts to concentrate their forces and launch conventional attacks on Western military bases or district centres. They have never succeeded and have usually suffered catastrophic losses to Western firepower and air support.

An attempt to threaten Kandahar City in 2005 saw Nato forces kill up to 1,200 Taleban fighters during a Western counter operation named 'Medusa'. An attempt by Taleban fighters in June to concentrate forces and again threaten Kandahar was defeated by Afghan Army forces with ease.

However, an attempt to overrun a small US base in the eastern province of Nuristan in July came close to succeeding.

Nine US soldiers died and more than 50 per cent of the defending force became casualties when Taleban fighters supported by Pakistani Kashmiri militants from the group Lashkar-e-Taiba successfully surprised the base and breached the outer defences of the base. They were repelled only after hand-to-hand fighting.

Times Recommends

• It’s only Brits who don’t appreciate me, says Blair
• Party’s over for Greek graspers
• White House tightens security for Xmas marathon