'It was like a terror operation,' Mr Lee said of the incident two months ago. 'There were many people who only spoke Chinese in the restaurant and no interpreters. The police were very aggressive - shouting at everyone. Everyone was running for their safety.'

A similar scene was unfolding simultaneously in four other Chinatown premises, marking the biggest hunt for illegal immigrants in Chinatown's 40-year history.

The operation involved 58 border and immigration officers and 50 Metropolitan policemen. Forty-nine Asians were initially detained in the operation, including 36 mainland Chinese and one Hong Kong national. Four were released on the same day after they were found to be working legally, and 10 Malaysians have since been deported from Britain. The rest are in detention and are expected to be deported once their cases are reviewed.

The raid highlights the dilemma British authorities have faced with Chinatown in recent years. Although occasions such as royal visits and the Lunar New Year celebrations tend to celebrate Chinatown as an important tourist attraction that emphasises London's multicultural identity, the area can also provide a highly visible and centralised focal point for the authorities' increasingly desperate war on illegal immigrants.

Growing concern about illegal immigrants prompted the Home Office last week to launch training courses for owners and managers of Chinatown restaurants in the almost impossible task of identifying illegal work applicants.

Last March, the Home Office estimated there were 310,000 to 570,000 illegal immigrants living in Britain. Recent figures suggest there are 100,000 unauthorised Chinese workers in Britain - a high figure considering a recent census ascertained there are 240,000 Chinese living legally in the country.

The issue of Chinese living and working illegally in Britain was forced into the public spotlight after 58 Chinese were found suffocated in a truck in the port of Dover in 2000 after trying to gain illegal entry. Other tragedies, such as the deaths of at least 21 Chinese cockle pickers in Morecambe Bay in 2004 and the terrorist attacks on the London Underground two years ago, have added to what some observers say is growing xenophobia in Britain.

The public relations potential of the Chinatown raid two months ago has not been lost on Home Office officials. It was later revealed that the Border and Immigration commander in charge on the day, Rolf Toolin, had invited the BBC to film the operation.

Mr Toolin later insisted at a meeting organised between the Chinatown Association and the Border and Immigration Agency that this decision was 'taken above his head at the Home Office'.

The Chinatown community reacted strongly to what they saw as heavy-handed police tactics. In an unprecedented show of solidarity, 130 residents and business leaders staged a two-hour strike in protest. Even the Chinatown branch of HSBC closed its doors.

Mr Lee, who has lived in London since arriving from Hong Kong's New Territories in the 1970s, said the Royal Dragon, which was forced to close for several hours after the raid, lost GBP3,000 (HK$64,000) in turnover because of it.

Jabez Lam, a Chinese civil-rights activist and former Hongkonger living in London, said the ramifications of the raid and subsequent TV news reports lasted a lot longer.

Mr Lam said business was down 30 per cent for three weeks across all Chinatown businesses.

'The BBC report was partly responsible for this,' he said. 'It used words like 'snakehead' and 'triad' when most of the businesses here are completely legitimate. This has a big effect on tourists, who are scared off by such language.'

Mr Lam also suggested the raid added to a climate of fear and suspicion in Chinatown at a time when the community faced an uncertain future over its place in London's West End. About 15 per cent of all Chinese restaurants in the area are up for sale and, tellingly, whereas 18 months ago a sweetener of GBP400,000 was required to secure the lease on a restaurant, now all of the leases on offer carry no premium.

One of the main sources of fear for the community is the application of the 2002 Proceeds of Crime Act to restaurants hiring illegal workers. The act, which was originally designed to confiscate money accrued by drug dealing, allows British authorities to take restaurateurs convicted of hiring illegal workers back to court and strip them of assets deemed to have been built up using such labour.

A case three months ago in Scunthorpe, in northern England, illustrated the far-reaching power of the authorities armed with this legislation.

David Xu, 46, and his wife Lu, 44, were convicted of employing illegal workers at the Great Fortune restaurant. But it was not the 18-month jail sentences (suspended for two years) that sent reverberations through the Chinese catering community in Britain as much as the subsequent order at a later court hearing for Xu to pay a fine of GBP500,000.

'The main problem for restaurateurs is being sure who is legally able to work and who is not,' said Mr Lam.

'There are about 80 different documents people looking for jobs can provide to 'prove' their right to work. Why should the restaurants do the Home Office's job in checking these people?'

This pressure is compounded by an immigration processing system that is groaning under the weight of the vast number of people in Britain's immigration 'no-man's land', with thousands more arriving each year.

'There are thousands awaiting a decision,' said Merlene Emerson, a member of the Greater London Assembly and a member of the Chinese Liberal Democrats, which helps Chinese and Southeast Asian people living in Britain with citizenship and employment issues. 'And while they are waiting they are unable to work or claim social security, so they look for unregistered work.

'ID cards [which the British government is planning to introduce] aren't going to solve the problems because of the processing backlog,' she said.

According to Mr Lam, there are also thousands of Chinese who have lost their right to stay but have not been removed because the Chinese authorities will not accept them as Chinese nationals. They, too, have no means of making a living legally and often seek work in the catering industry.

One major Chinatown restaurateur, who wanted only to be referred to as Fai and whose parents hailed from the New Territories, said London's Chinatown was built on the cooking skills of immigrants and needed those skills to survive.

'When the first Chinese came to this part of London in the 1960s, they knew the traditional skills that make good Chinese food we can sell reasonably cheaply. But most of their children went through the education system here and most do not want to work in restaurants.

'This gap was filled by people coming from Vietnam in the 1980s. But now many people coming here legally are from Eastern Europe and when people come to eat in Chinatown they don't want to see westerners working in the restaurants. That is not the experience they are looking for in Chinatown.'