The study by the Institute of Race Relations and the Joseph Rowntree Trust, to be officially launched at the TUC conference next month, predicts that violent anti-immigrant sentiment will be the consequence of the Government's Asylum Bill, which is expected to become law by the end of the year.
The report is based on research in 10 European countries - Germany, Denmark, Sweden, Holland, Spain, Belgium, Italy, Norway, Switzerland and Austria - which have already implemented similar legislation.
The institute warns that the creation of "designated accommodation" for refugees invariably results in attacks by far-right groups. And it predicts the rise of squatter camps infested with rats and disease once assistance is withdrawn from asylum seekers.
The use of designated housing has already provoked a wave of violence in Germany with neo-Nazis burning down hostels. In one of the worst attacks, 10 asylum seekers were killed and 38 injured in a far-right attack on a refugee hostel in Lubeck, Schleswig-Holstein, in 1996.
Firebomb attacks have also occurred in "liberal" Holland, Sweden and Norway. The report says attitudes towards asylum seekers have hardened in these countries since the introduction of tough new laws.
In February this year, a proposed asylum centre at Limburgian Meerssen in Holland was firebombed twice in one month. And in Denmark, an asylum centre was burned down days before 76 refugees were due to move in.
A voucher system, similar to the one proposed for the UK, has provoked protests in Germany, where 150 refugees went on hunger-strike in 1995 and occupied the town hall in Bochum demanding the right to buy and cook their own food.
The institute says a black market is already forming in Britain, with asylum seekers, desperate for cash to make phone calls, post letters or use public transport, selling vouchers at less than their face value.
Refugees who have been refused assistance but have not been deported face a worse fate. In Italy, in 1994, 1,000 Bosnian and Roma refugees ended up in a squatter camp beside a chemical waste tip where babies were attacked by rats.
Refugees have already died after being refused medical help or asking for it too late.
In Belgium, Nigerian John Madu died at Liege railway station in 1998 after being refused treatment for severe liver damage for a year because, being "illegal", he had no medical insurance. In the same year, a 26-year- old Turkish Kurd died of acute tonsillitis after being denied medical attention and in April 1995 a baby died from lack of oxygen in Caserta, Italy. The doctor had refused to help the child's mother, a Zairean, while she was in labour and told her to get a private doctor.
Liz Fekete, who helped to compile the study, said that in trying to harmonise with the rest of Europe, Britain is adopting the worst of its policies.
"What is being proposed is segregation and a type of apartheid for asylum seekers."
A HISTORY OF INTIMIDATION
June 1995, refugee Suppiah Selvarajah died when rubbish caught fire next to his camp.
In 1992, the Rostock police chief stopped his officers intervening when a mob set fire to a hostel with 100 Vietnamese refugees inside.
August 1998, 10 local authorities refused to open any more asylum centres, complaining about refugees' "foreignness".
March 1998, a Somali refugee hanged himself because he had no work permit or financial support.
April 1996, fascists led a campaign against a new asylum centre in Rotterdam.
In 1994, a former refugee hostel in Basel was firebombed twice by locals to keep asylum seekers out.
February 1995, Sri Lankan Gnanasegaram Selvarajah died in a hospital corridor for lack of treatment of a broken leg received in a racist attack.
In 1998, UN criticised the government for allowing doctors to refuse treatment to children of illegal refugees.
In 1994, a factory being converted into a refugee centre was destroyed by protesters.
In 1997, protests against refugees resulted in locals attacking Somalis.