The fatal shootings of a rabbi and three children outside a French school have been condemned by the British Government as an "appalling" act as south-west France was placed on the highest level of terrorism alert.

A manhunt is under way after Rabbi Johnathan Sandler, 30, his two young sons and another child were the victims of what was feared to be the latest in a string of racist murders.

The killings at Ozar Hatorah school in Toulouse on Monday were carried out with the same heavy calibre .45 automatic pistol used in two attacks in which three soldiers of north African and Caribbean origin were murdered in the region last week.

A man who lives near the school said he was with the rabbi just before he was shot.

"I said 'Bonjour' to him like normal," said the 29-year-old, who gave his name as Baroukh. "Then he went out into the school entrance. I heard the shots and I turned around and saw him on the ground. He looked dead. But I didn't have much time to see who did it because I panicked and started running away."

Foreign Secretary William Hague said on Monday: "I am horrified by the attack this morning on the Ozar Hatorah Jewish school in Toulouse.

"The British Government expresses its deep and sincere sympathy for the families and friends of the victims and for the entire Jewish community in France. This act of calculated cruelty will unite all decent people in revulsion and condemnation. There is no excuse for such acts of appalling violence."

The issues of race and religious minorities have been under scrutiny in France's presidential campaign. Incumbent president Nicolas Sarkozy flew to the scene and said authorities were raising the terrorism alert to scarlet - the highest on a four-point scale - in Toulouse and neighbouring areas.

Jewish leaders in Britain expressed their shock at the attack and rallied behind the victims' relatives. Chief Rabbi Lord Sacks said: "I am deeply shocked and saddened by the atrocious acts of murder in Toulouse this morning. We pray that the Almighty brings comfort to the children, parents and teachers at the Ozar Hatorah school and that the injured are speedily restored to full health."

It has emerged that the gunman may have filmed the attack. The French interior minister Claude Gueant said the attacker "was wearing on his bloody chest a kind of filming apparatus". Asked whether the gunman recorded the scene, he responded: "We can imagine that."