Welfare cuts will drain £129m a year from Croydon's economy, according to research into the local impact of Government reforms.

The borough will lose out on the sixteenth largest sum in the UK, a study by the Centre for Regional Economic and Social Research (CRESR) predicts.

Reforms including the benefit cap, bedroom tax, child benefit freeze and housing welfare cuts will diminish residents' spending powers, the report said.

Only three London boroughs stand to lose more.

Croydon will lose £540 for every working-age adult, according to CSESR's study, which forecast £19bn coming out of the national economy due to welfare cuts.

Cuts to child benefit take the highest toll, with the borough missing out on £89 for each adult resident.

Changes to Local Housing Allowance will cost Croydon £80 per person and the household benefit cap will lose the borough £17 per resident, the report said.

Steve Reed, Croydon North MP, said: "People who earn very little are very likely to spend everything coming into the household, so that money is going to be taken out of the local economy and cause difficulties for local businesses."

Tim Sharville, chair of the Crystal Palace Chambers of Commerce, predicted welfare cuts could take a toll on the high street.

He said: "If people have got less money to spend, it will have an effect. And with the rise of the online shop, it is going to force people online even more, so the high street will suffer."

But Croydon Central MP Gavin Barwell branded the figures "a nonsense" because they do not take into account the possibility of benefit cuts spurring people on to find work.

He said: "The first flaw in that is that some people, as a result of the benefit cap, will get work.

"The second issue is that if you had not made the welfare changes, then taxes would have to be higher to pay for the extra Government spending, and that would take money out of Croydon's economy."

The household benefit cap came into force in Croydon on Monday, as well as in three other boroughs chosen to test it.

It limits household welfare income to £350 a week for single adults or £500 for couples and parents.