The Institute for Public Policy Research (IPPR) has warned the economic downturn could be longer and deeper if Government plans to restrict immigration are implemented.

The think tank said placing restrictions on migrants who plug skills gaps, or take jobs which Britons will not do, will damage the economy

It criticized proposals in the Immigration and Citizenship Bill, which will be published on Thursday, including the proposal to end the automatic right to stay after five years' residence and replace it with "earned citizenship". This would see migrants who want to settle becoming "probationary" citizens to show they are contributing to the country.

But the IPPR claims the number of people coming to Britain for work would reduce "naturally" as the economy slowed and more could be put off by the new proposals.

Tim Finch, head of the IPPR migration team, said, "Migrants become easy targets at times of economic difficulty but introducing yet more tough measures to exclude people could damage our prospects for economic recovery.

“As it stands, the Borders, Immigration and Citizenship Bill could deter migrants who are in high demand and who are essential for our economy.”

He called for a "clear" and "flexible" system for earned citizenship and said it could be unfair to deny benefits to migrants who are working and paying taxes.

However, an influential groups of MPs, peers, church men and business experts warned this week that Gordon Brown's drive to create new jobs for British workers and get the unemployed back in work risks being undermined by his immigration policies.