The Government faces an "unpalatable choice" between an immigration policy that will damage the economy or the possibility of failing to fulfil a key promise, a think-tank said today.
The Migration Advisory Committee's (MAC) recommendation for the level of the proposed cap on non-EU migrant workers showed the scale of the challenge faced by the Government as it aims to deliver its pledge to cut net migration from 196,000 to the tens of thousands by 2015.
Visas for students will have to be more than halved and family visas will face a 20% cut alongside a proposed reduction of between 6,300 and 12,600 in the number of non-EU migrant workers for 2011/12, the MAC said.
Such workers generally earn more and have a higher employment rate than the average British worker, leading to a £6 reduction in the GDP per head.
Sarah Mulley, associate director at the Institute for Public Policy Research, said the report implied that "implementing such drastic cuts in entry visas over the next four years would have serious consequences for the UK".
She said: "The Migration Advisory Committee's analysis shows clearly how difficult it will be for the Government to fulfil its promise to cut immigration substantially.
"The Government now faces an unpalatable choice between introducing a policy which it knows will be damaging to the economy and public services, or failing to fulfil a key promise to the electorate."
Julia Onslow-Cole, head of global immigration at PwC Legal, added that if the upper limit of the MAC's recommendation was imposed, "we believe this would adversely affect UK economic growth".
Oxford University's Centre on Migration, Policy and Society (Compas) added that reducing Britain's growing reliance on migrant workers required "a wide range of policy changes that go beyond changes in immigration policy".
Senior research fellow Dr Bridget Anderson said: "Reducing the number of working visas without dealing with some of the fundamental reasons employers feel the need to recruit migrant workers is a bit like fixing a puncture on your bike without bothering to mend the brakes.
"Without more training for British workers and incentives for taking on new recruits, it is often more cost-effective for companies to bring in ready-trained and experienced migrants."
She added: "Regardless of whether you support the idea of a cap on labour immigration or not, one thing is certain, which is that on its own it will not reduce Britain's growing reliance on migrant workers.
"Reducing demand for labour migrants requires substantial changes, readjustments and trade-offs in different areas of policy, business and society.
"The bottom line is that reducing Britain's demand for migrant labour requires a lot more than just changes in immigration policy."
Business leaders also voiced their concerns that the proposed cap, due to come into force from April next year, could damage the UK's competitiveness.
David Frost, director general of the British Chambers of Commerce (BCC), said the report showed there will need to be "thousands fewer visas for skilled workers" if the Government is to meet its target.
"While we support the prioritisation of those who have a clear job offer over those who don't, we must still allow global talent into the UK," he said.
"Evidence suggests that skilled migrants make a positive economic contribution to UK plc.
"Business has no problem with tighter eligibility criteria but an inflexible cap could harm business growth.
"Maintaining flexibility would ensure that employers get the skills they need in the short-term - while also training up UK workers for the medium to long-term.
"The Prime Minister has said Britain is 'open for business'. Our migration policies must eflect that sentiment."
The Confederation of British Industry (CBI) welcomed the MAC recognition that all parts of the system - students and families, as well as workers - should play their role.
Neil Carberry, the CBI's head of employment policy, said: "The committee rightly accepts that those coming to the UK with a job offer should have priority, and this has been something that businesses have consistently called for.
"It is also important that companies with an international operation can transfer their own staff, as required, on a temporary basis, and we would like to see these intra-company transfers exempted from the cap."
The Mac report found that the proposed cap on non-EU migrant workers "will have significant effects on the micro-economy, in terms of impacts on individual sectors and occupations".
But it added: "Nonetheless, in the short-term, the overall impacts on GDP and GDP per head will be relatively small.
"In the longer-term, the effects may be more significant, due to a continued accumulation over time of the relatively small static effects."
The Law Society, which represents solicitors in England and Wales, urged the Government to refrain from introducing restrictive limits on the ability of UK law firms to recruit the staff they need in order to remain globally competitive.
Chief executive Desmond Hudson said: "The long-term implications of restricting skilled migration will be that this legal work will move offshore and the UK's competitiveness will be compromised."
Education chiefs also warned the proposed cap will mean universities "will be unable to compete effectively for international staff".
Nicola Dandridge, chief executive of Universities UK, said: "This competition is real and urgent and we simply cannot compete if our hands are tied by artificial migration limits.
"The UK will lose out if these recommendations are accepted by the Government."
She added that the group, which represents the UK's universities, remains "very concerned about the impact of the policy of reducing net migration on international student mobility to our universities".