Men from eastern Europe are the latest victims of gangs who are promising jobs in Britain but delivering a life of virtual slavery

Gedimanas Rekesius was sitting in a park sipping a coffee when he answered the question that made him a modern-day slave. "Are you working?," the middle-aged man asked, as he joined Rekesius on a bench outside the Medical Academy hospital in Kaunas, Lithuania's second largest city.

Rekesius's interrogator must have known the answer. It was the middle of the afternoon in chilly late April and Rekesius was missing four fingers from his right hand, the result of an accident while working in a sawmill. No, he was not working. "You go to England, I'll get you a job and accommodation," the man promised.

"I was unemployed at that moment and I thought, 'I will take the risk, maybe everything will be fine'," Rekesius said. Only now, six months after he made the decision to travel via minibus from Lithuania to London, is it clear how naive Rekesius was.

Immediately after being deposited outside a Morrisons supermarket in north London, where he was collected by a Russian man and his Lithuanian wife, Rekesius had his passport taken from him and was made to work.

Each morning he was given a list of chores to perform around the Edmonton flat where the couple lived with their two young children. "For five months I asked when I would get a job, but all I did was clean their home. They were always sending me to the shop to buy them meals, Pampers for the children, that sort of thing. I felt if I said no, there would be big problems."

Rekesius pressed the Russian for help in finding a job or for money for performing his chores. He slept on a mattress in the living room and ate his meals alone outside on a balcony. "They said to me: when you find a job, you will pay us for accommodation, but until then you will have to work around the house."

The Russian man, whose wife told the authorities she was a single mother and was claiming benefits, helped Rekesius to open three bank accounts. "He didn't work, but he drove a nice car, had nice clothes. Other Russians would come and visit him at the flat," Rekesius said.

One day the Russian told him: "We have to go to the bank to withdraw money; we have five hours." It transpired that the Russian and his accomplices were participants in a sophisticated fraud that resulted in £10,000 being transferred into Rekesius's account, which he was then forced to withdraw. It was clear that the gang had performed the operation before.

One night last August, as the gang celebrated their latest scam, Rekesius fled. He had no money, but a Lithuanian woman at a bus stop bought him a ticket to central London, where he slept rough for more than a month before being taken in by the homeless charity Thames Reach.

As he prepared to return home last week, Rekesius painted an abject picture. He was obviously vulnerable, but fully aware of how a fateful conversation had turned his life upside down. So why did he come to London on nothing more than a stranger's promise? Rekesius shakes his head. "I ask myself the same question. I am 48 years old. I can't find the answer."

Unfortunately Rekesius's story is not an isolated one; it is part of a disturbing new trend. The Observer has established that police and homeless charities are receiving weekly reports about eastern European men being exploited in the UK by criminal gangs, often from their home countries, who lure them in with offers of jobs, housing and sometimes drink or drugs.

In 2004, when the first eastern European countries became part of the EU and their workers gained access to the UK, these reports were infrequent and poorly documented. But homeless charities say the reports have multiplied over the last three years and have become increasingly shocking in what they reveal.

"We knew women were being trafficked for sex, but not men for labour," said Megan Stewart, who runs Thames Reach's reconnection team, which helps eastern Europeans to return home. She has come across more than 20 cases of enforced slavery in the last couple of years. "In March we helped two Czech men who had been held against their will in a flat in Birmingham for two years. They were taken every day to a factory in Luton and had to work from seven in the morning to seven in the evening. If they argued with their captors, they endured horrendous beatings. One of them was handcuffed to a radiator; another was burnt with a pipe on his torso when he asked to send some money home."

Four Hungarian men helped by Thames Reach were forced to hand out leaflets and steal petrol from cars at night to pay the £20 cost of their accommodation. They were permanently in debt to their captors – a tactic of the gangs – and existed on a diet of Nutella sandwiches. "Their teeth were ruined," Stewart said.

Stewart said the gangs' tactics were changing. "They've stopped bringing new blood into the country and are now targeting day centres and homeless shelters. These guys are often cold and hungry, and if they are offered work and accommodation it's all too tempting."

Out of sight of the authorities, the consequences for those exploited can be horrendous. Lydia Haritonova, who works for Thames Reach, helped a Lithuanian woman who had paid £3,000 to a middleman to secure her a job in England. She worked on a farm in wet, freezing conditions. After months of picking onions in fields, her leg swelled up and surgeons were forced to remove a limb. "She was told she would get an artificial limb," Haritonova said, "but because she was not entitled to benefits she could not stay in the country to have it fitted."

The Serious Organised Crime Agency is now investigating several cases of alleged slavery. Last week it emerged that a Polish gang had trafficked more than 200 people to the UK and used their identities to carry out an estimated £2m benefit fraud. So far 31 people have been arrested in relation to the scam, the subject of a two-year investigation by customs officers and Polish police.

The large number of eastern Europeans on the UK's streets means some will end up being exploited. Last year the proportion of the near 4,000 homeless people in London who were from the UK slipped from 52% to 48%, the first time it fell below 50%. The proportion of homeless who were from eastern Europe rose from 25% to 28%.

The Passage Day Centre in London receives one report a week of eastern Europeans being exploited by criminal gangs. "Often they are taken away from the cities to rural areas where, in extreme cases, they are imprisoned," said its director, Mick Clarke.

"It's the sheer diversity of those who are doing it that's troubling. We have seen people in the building industry; people in suits; people speaking in English accents; people with eastern European accents, all targeting our clients. Four or five times we've had people try to blag their way into the day centre to target rough sleepers. It's astonishing that in 21st-century London this stuff is going on."

Clarke fears the Olympics will see a significant increase in eastern European workers being exploited. "There's this myth, even with the economy as it is now, that people believe you can come to London and the streets are paved with gold. But unless you've got a firm offer of a job, don't come."

Homeless charities are now calling on embassies to do more to alert their citizens back home to the threat of exploitation.

"Criminal gangs have been exploiting people in shocking ways tantamount to modern-day slavery," said Mike Nicholas, a spokesman for Thames Reach.

"Many of the people being exploited by these gangs are from rural areas where regular church attendance is still often the norm, so we are pressing for the Catholic and Orthodox churches to get involved."

Such action might have helped Rekesius, who said he wanted others to learn from his story. "I want people to know what happened to me. I will find it hard to trust anyone again."