Migrationwatch UK said the gains to British economic growth from recent inflows of cheap labour from eastern Europe and elsewhere were almost outweighed by the proportionate rise in population from immigration, Reuters news agency reported.

But the government and the Confederation of British Industry said immigration had brought real benefits to the economy.

Net levels of immigration to Britain reached 292,000 in 2005 and have trebled since Labour came to power in 1997, Migrationwatch said.

Foreign workers were reducing pay rates by accepting lower wages, prompting many of the unemployed to remain on benefits rather than look for work.

"Immigration is not essential to our economic growth. Wages should be allowed to rise to make lower paid jobs worthwhile and to encourage productivity. Increasing productivity is the only way that a nation can become richer," Migrationwatch said.

The accession of Romania and Bulgaria to the European Union on January 1 has added to concerns over immigration after an influx of Poles and other eastern Europeans to Britain following the EU's 2004 expansion.

Last year, Britain decided to impose restrictions on the number of Bulgarians and Romanians allowed to work in a shift from the open-door policy adopted towards other new EU members.

The opposition Conservatives said the government needed to gather more accurate information on the effects of immigration.

The government said that migration was good overall for employment and for the economy.

"The Treasury estimates that migration accounts for between 10-15 percent of trend growth, and independent research has found that migrants make a net contribution to the Exchequer," a Home Office spokeswoman said.

The Confederation of British Industry said migrants brought valuable skills and helped to fill job vacancies where Britons are unable or unwilling to do so.