Sweeping changes to employment and immigration laws will be announced by the Home Secretary, David Blunkett, next month in a move designed to flush out up to 500,000 illegal foreign workers.
Immigration "hit squads" will concentrate on the hotel and catering, construction, clothes manufacturing, agricultural and information technology industries as part of a programme to treble the rate of removal of illegal immigrants and failed asylum-seekers to 2,500 a week.
Lord Rooker, the Immigration minister, has promised that a series of "high-profile prosecutions" of employers will send a message to people-smuggling gangs that it is no longer safe to work illegally in Britain.
But the new government strategy has provoked concern among business leaders and refugee support groups.
Miles Quest, a spokesman for the British Hospitality Association, which represents 30,000 establishments in the hotel and catering industry, denied the sector had a problem with illegal workers.
"This implies that the industry is full of unskilled illegal employees when we are desperately trying to raise the profile of the industry as a worthwhile career," he said.
Nick Hardwick, chief executive of the Refugee Council, said many illegal workers were meeting a demand in the British economy for skilled and unskilled labour. "If you simply crack down on the employees without tackling the question of demand, you will not solve the problem," he said.
As part of its White Paper on Asylum, Immigration and Citizenship, the Government will frame a code of conduct for employers in hiring foreign workers which they will have to abide by, or face being taken to court.
In addition, employers who are found to have been deliberately complicit in bringing illegal immigrants to Britain to work could face sentences of up to 14 years.
Lord Rooker claimed it was easier to work illegally in Britain "than in any other country in the European Union".
"There are small firms in this country which are paying the minimum wage, struggling to make ends meet, keeping going, and being undercut by some other types of firms who are employing illegal labour."
Prosecutions of employers for using illegal workers were currently "virtually non-existent", he said. "We are going to tackle this in a much more high-profile way as a means of sending the signal back down the line. A few big prosecutions will send the right signal."
Some industries within the British economy were clearly using large numbers of illegal workers, he said. "We are having a look, sector by sector. We have areas where it is known there is a propensity to have labour that is not legal. For example, construction, hotel and catering." Illegal workers would face being deported, he said. "There will be no amnesties. Some people will be sent packing, there's no question about that. If nothing else it will help us to meet our removal targets."
The Government is anxious to give employers more opportunities to fill skill shortages by legally hiring foreign staff. An overseas advertising campaign will attempt to lure up to 350,000 specialist workers to Britain.
Lord Rooker said: "We have to advertise and let people know that we have ways into this country to work to meet our skills shortages in a more upfront way than before. We want people to avoid the traffickers."
The purge on illegal working comes as concerns grow about the extent to which smuggling gangs are exploiting weak border controls in Balkan countries to bring people illegally into the European Union and on to Britain, where some are forced to work in brothels and sweatshops. Lord Rooker said Britain was "extremely concerned" about the Balkan route.
Britain is to set up a network of immigration intelligence officers across the region to investigate the activities of organised gangs who are smuggling people into Britain from Turkey, Kosovo and the Middle East.
A team of senior British immigration officials has also been posted to Bosnia to set up controls at borders which are leaking up to 50,000 illegal immigrants a year to Western Europe. The British team has requested the help of military helicopters for border patrols.
Intelligence reports suggest that Turkish and Chinese criminal gangs are working together to transport migrants to Britain through Bosnia and Yugoslavia.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies