Migrant workers from Bulgaria and Romania are to be blocked from working in Britain amid concerns that economic migration is placing new strains on public services.

UK newspaper the Observer said that Home Office officials did not believe the doors should be opened to the two countries and would recommend that current EU restrictions would be continued for at least another year.

Estimates of the number of Romanians and Bulgarians who would come to Britain if restrictions were lifted ranged between 40 000 and 300 000, the newspaper said.

Tight restrictions on Bulgarians and Romanians seeking work in Britain were announced in 2006. The Home Office pledged to review the restrictions annually. But its recommendation that the ban should be continued was likely to be criticised by the Romanian and Bulgarian governments, which complain about second-class treatment, the newspaper said.

But the Foreign Office believed this view was misguided and it had drawn up a document arguing that continuing the ban was not in Britain's interests and that it should now be relaxed. The Foreign Office document said only a small number of Romanians and Bulgarians would come if the laws were relaxed, with the majority going to Greece, Italy and Spain, with which they had stronger ties.

It also warned that continuing to bar Romanians and Bulgarians from working in the UK legally would force them onto the black market, leading to exploitation and a loss of tax revenue, the newspaper reported.

This view was shared by many experts on the impact of migration. "We urged the government to fully open up the labour market," said Jill Rutter, senior research fellow with the Institute of Public Policy Research. "Studies showed it was social networks that propelled migrants here. The numbers of Bulgarians and Romanians in Britain were so small there were no social networks to attract them."

She said it was time for the government to widen the debate. "We have seen enormous benefits from migration that have gone to employers and the Treasury, but we haven't seen any talk of how some of the money should be channelled to hard-pressed public services."