The new cap on immigration may backfire for contractors, according to one expert.

One fear is that UK contractors may lose opportunities if international firms begin to cancel projects because they can't recruit workers with the high skill levels they need.

Oil & Gas UK's special projects manager Jessica Burton said that it is positive that the government is supporting skilled migrants who will contribute the UK's recovering economy.

"Any reduction target should not be met to the detriment of the UK's competitiveness as a global centre of excellence for business and technology, and further cuts to the number of highly skilled migrants entering the UK would be very damaging," she added.

The new immigration cap will become effective in April 2011 but will not affect intercompany transfers of those earning more than £40,000.

This comes after news that VAT rules are set to change for contractors due to the 20 per cent rate to be introduced in early 2011.