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Up to 200 white and Asian youths were involved in a series of overnight attacks on pubs, shops and restaurants. Many vehicles were also damaged or destroyed.
Community leaders have expressed surprise at the sudden eruption of racial hostility and said relations between different ethnic groups in the town had previously been good.
Officers investigating the riots said they have not yet made a connection with recent disturbances in Bradford, Oldham and Leeds.
During violence stretching over several hours one Asian family was trapped on a first floor flat when the shop below them was firebombed.
They were eventually led to safety by neighbours.
Elsewhere in Burnley, an Asian gang firebombed the Duke of York pub and threw bricks at neighbouring shops and offices.
Newsagent Colin Dawber, whose shop is opposite the pub, said he was puzzled why race violence had flared up in the town.
"We bought this shop 10 years ago and we've had no problems at all - we have customers from right across the ethnic mix and age groups," he said.
But Burnley Councillor Peter Kenyon said he thought tensions had been simmering for some time.
"The last concrete evidence was the size of the vote for the BNP in the local elections.
"I'm appalled really at what's gone on here over the weekend," he said.
In Context
Police investigations concluded the disturbances in Burnley started when two gangs of Asian and white youths were involved in a fight. Four Asian men were found guilty of violent disorder in October 2002.
The government commissioned the "Community Cohesion Review", chaired by Ted Cantle, after a summer of racial violence in towns across the north-west of England.
The report found the Burnley disturbances had been sparked by a war between Asian and white drug gangs - rather than being "race riots" - and were exacerbated by "grinding poverty".
But it also said the clashes had been exploited by organised white racists.
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