West African children are held hostage in the UK
An investigation by Radio 4's Today programme found the children were being held in lieu of debts incurred by their parents.
It found many of the children were severely abused and treated as slaves.
But when the authorities were alerted to the problem, there was little they could do about it.
The Today team found hundreds of children from West African countries such as Ivory Coast and Nigeria were being handed over to UK gangs.
Many of the children were handed over after their parents fail to pay the gangs for organising their own entry into Europe.
'Squalid' conditions
The children were then held, often in shocking conditions, by the racketeers who could claim benefits of up to £40 a week per child.
The investigators cited one case in which 12 children were living in "cramped, squalid" conditions with one woman - giving an income of up to £480 per week.
One well-organised network involved the UK and Ireland, with some children being passed around adults - appearing first in one country, and later in another.
One official in the Irish Republic said: "This debt repayment system is very much in operation. And it seems to be very well orchestrated.
"They (the people who hand over their children) are sucked into it, because they're being forced to by those who are operating it. They've no choice.
"But from the point of view of actually trying to identify whether these children are being used, it's virtually impossible... they disappear and they go back to the UK."
A UK social worker said child trafficking was common in Britain - he had come across it in every London borough he had worked in over 15 years.
He said social workers did not have the jurisdiction to investigate such rings and relied on the police, immigration authorities and Department of Social Security (DSS).
But the Today team found these agencies often found themselves restricted.
The DSS does not have a remit to investigate welfare cases. It will only probe cases of benefit fraud - for instance when more than one person is found to be claiming for a particular child.
Individual police forces do not have the resources to investigate trafficking rings which can stretch across forces and even countries.
Campaigners are calling for a special police unit, similar to the Metropolitan Police's vice squad, to be set up to target human trafficking.
Mike Kay from Anti-Slavery International says there is also an urgent need for a change in the law.
He said: "We need to have legislation which deals with trafficking for both sexual and labour exploitation.
"Until you've got the legislation in place, you can't make it a priority for police forces."
New police squad
The National Crime Squad (NCS) is planning to launch a specific Immigration Crime Team next month, which will target gangs involved in human trafficking.
NCS spokeswoman Jackie Bennett told BBC News Online: "We will be targeting the criminal, not the crime.
"Some of these gangs are making huge sums of money trafficking people. The age of the immigrants is irrelevant."
She said these gangs often used routes which were already well trodden by drug and cigarette smugglers.