The London economy is far more reliant on overseas workers than many in government think, according to a report by the London Chamber of Commerce and Industry (LCCI).

The government has proposed strict caps on non-EU migrants into the UK, with assessments largely based on financial criteria.

But the LCCI in its report published on Wednesday, said foreign workers are "essential" to the capital's businesses and that migration reforms are already causing damage to businesses.

"We fully understand the political and social pressures placed on the government to reduce net migration, but our report shows that by preventing UK businesses from accessing the best global talent these pressures will be made worse not better," Colin Stanbridge, LCCI's chief executive said.

"The best way to provide long-term, sustainable employment opportunities for British workers is by ensuring that our firms are able to grow, but our research shows that the government's reforms are already stifling the growth of some companies."

More than 60% of businesses employ, or have considered hiring, non-EU migrant workers, the study found. Small businesses were almost as likely as larger ones to do so, according to the LCCI. Many thought that hiring foreign staff would open up export opportunities in new markets.

30% of employers looked outside of the EU for staff due to a a lack of skills in the domestic market, the study found.

Nearly a quarter of companies reported that the government's changes, introduced in April, have already made it difficult to hire. The same amount said that they would rather not hire at all than pick up an EU national or UK worker without the right skills.

In November, a group of leading academics branded the government's caps on non-EU immigration "anti-growth".

In a statement accompanying the report's release, George Kessler, deputy chairman of retail services group Kesslers International, said: "I travel regularly to China and Hong Kong and am horrified by the effect  the government's legislation is having on the perception of the UK, which is no longer seen as an open country to do business. Several of my partner companies are now looking to other European countries for their European office locations."

Immigration Minister Damian Green said: “Immigration to the UK has been too high, which is why we are tackling abuse and reforming all routes to reduce net migration to the tens of thousands.

"Every month since we introduced the limit the visas on offer have been under-subscribed, so not a single valuable worker has been prevented from coming here.

“We have already put in place measures to attract foreign investors and entrepreneurs, and have been in discussion with London businesses. It is essential businesses reduce their reliance on migrants and provide jobs and opportunities to resident workers."