England lost one of the most incredible Tests of all time in heart-breaking fashion on Tuesday morning when Jimmy Anderson was dismissed with just two runs needed for victory.

In incredible scenes at the Basin Reserve last pair Anderson and Jack Leach had taken England to the brink of a success that would have been equally as extraordinary as that won by Ben Stokes and Jack Leach for England at Headingley four years ago.

But with two needed Anderson, who had smashed a four off Neil Wagner's previous over, got the faintest of tickles down the legside off the left-armer into the safe hands of Tom Blundell to give New Zealand victory, to coin a phrase, by the barest of margins.

There was controversy too because Wagner's previous ball had been perilously close to being called wide but umpires Chris Gaffaney and Rod Tucker gave him the benefit of the merest hint of doubt.

Only once in Test history have a team won a Test by one run before and this was only the fourth time that a side have won in Test cricket after following on. It was also the first time England have ever lost after asking anyone to follow on.

It is bitterly disappointing for England but when the dust settles they will know they have played a full part in a remarkable game in keeping with their stated aim of trying to make Test cricket as entertaining as possible.

This was certainly that. After five compelling topsy-turvey days it came down to England's last pair needing to score seven runs to give England a 2-0 series victory and their seventh successive Test win, their best run in nearly 20 years.

It looked as though they would do it when Anderson smashed Wagner to the boundary but with the 40-year-old poised to score the winning runs in a Test match for the first time, Wagner and New Zealand, so often the bridesmaids, had the final word.

England will be kicking themselves that they did not make it five wins in five overseas Tests this winter and seal their seventh successive victory after Joe Root and Stokes put them within sight of the finishing line with a partnership of 121.

The England captain and his predecessor came together with England in crisis having lost four wickets in a nightmare first hour of the final day, culminating with Harry Brook being run out by Root without even facing a ball.

Root held his head in his hands after that moment of madness but so well did he bat in taking England to within 57 runs of victory with Stokes that English nerves had started to ease and it looked certain England would complete another extraordinary win.

But then Stokes, who had been clearly struggling with his chronic left knee injury, aimed an ugly one-handed swipe at Neil Wagner and was caught at mid-wicket to undo all the good work and discipline he had shown in providing the perfect support to Root.

England were still favourites while Root, batting sublimely again after his unbeaten 153 in the first innings, was at the crease but he too gave his wicket away on 95 trying to pull a ball from Wagner that was not quite short enough and lobbing to mid-wicket.

Stuart Broad's attempt to smash England to victory quickly ended but Ben Foakes was exceptional in marshalling the tail with Leach in scenes reminiscent of the famous stand between Stokes and Leach against Australia at Headingley four years ago.

Foakes made 35 and took England to within seven of their target but he too fell trying to pull the short ball in his case off Southee.

Earlier England, who have pulled off six breath-taking run chases since Stokes came together with Brendon McCullum at the start of last summer, looked unusually twitchy and indecisive in their pursuit of 258 for victory.

They had lost Zak Crawley overnight and nightwatchman Ollie Robinson quickly followed him. Ben Duckett then fell trying to cut Matt Henry and edging behind and Ollie Pope was far too frenetic before he became the first wicket to fall to Wagner.

When Root dabbed Tim Southee into the gully and set off for an unlikely single, Michael Bracewell running round from gully to easily run out the new superstar of English cricket, England had contributed massively to their own downfall.

It looked like they would get away with it while Root and Stokes were together but they suffered only their second defeat in their remarkable transformation over the last year as New Zealand not only pulled off an amazing victory but extended their unbeaten home record in Test cricket to 11 series.

England, meanwhile, still haven't won a series here since 2008 but they will be undeterred in their quest not only to play winning cricket but also an entertaining brand that will help save the endangered old format.

There will be those who criticise Stokes for giving New Zealand a sniff of a chance when he made them follow on but it is still exceptionally rare for a side to win this way – the last time it happened was in Kolkata in 2001 when Australia lost to India – and the England captain insists he will always take the attacking option.

Now attention will turn to the state of Stokes left knee ahead of the Ashes this summer and whether he will be fit enough to fulfil his £1.6million IPL deal with Chennai. But the memory of one of the most incredible Tests in history will last long for anyone who saw it.