Business secretary Vince Cable told the Financial Times that caps on immigration are costing the UK thousands of jobs.
A restriction introduced by the coalition Government on the number of non-EU workers allowed to enter Britain has meant that many companies have not been able to recruit the staff they need.
Cable said that the caps are forcing companies to relocate overseas and that “a lot of damage is being done to British industy.”
“I am not known as the best friend of investment bankers, but they are quite an important source of economic activity,” he said.
“I was talking to people in the City and there were two investment banks that recruit hundreds of people from the non-EU area, Indians and Americans.
“They were allowed only 30 to 40 [visas]. They have moved some operations to Hong Kong.”
The business secretary said that he supported plans for a permanent immigration cap but that he wanted to see it applied flexibly.
He claimed that companies are unhappy with the way border officials have calculated how many work permits each company should have, based on the number they used in 2009. However, many companies had recruitment freezes last year, which have now been lifted.
Cable would not name the companies he had spoken to but said that complaints had come from investment banking, engineering and pharmaceuticals.
In one instance, he said, a UK company that needed 500 specialist engineers was given a quota of four.
The Prime Minister’s official spokesman said that he was aware of Cable’s concerns but added: “I don’t think there is evidence it is doing huge damage to the economy.”