Three decades of multi-culturalism have left Britain an unequal and segregated nation that is in danger of breaking up, race watchdogs say in a report published today.

The Commission for Racial Equality fears the country is ''fracturing" and extremism is being fostered by the retreat of different groups behind their own ethnic walls.

The bleak analysis is contained in the final report of the CRE before it is absorbed into the new Equality and Human Rights Commission at the end of this month.

''Only a few decades ago, it was acceptable to put up a sign in a boarding house or B&B saying 'No blacks, no Irish, no dogs',?" the report says.

''We don't see those signs any more, thanks to the race relations legislation that made them illegal, as well as 30 years of hard work by the CRE and others in changing the national mindset to make them morally inconceivable."

But the policy paper - entitled A Lot Done, A Lot More to Do - adds: ''Let's not kid ourselves.

''Britain, despite its status as the fifth largest economy in the world, is still a place of inequality, exclusion and isolation.

''Segregation - residentially, socially and in the workplace - is growing."

The CRE says priority needs to be given to improving ''community cohesion and integration".