I was hoping to tow a micro teardrop type caravan with my 63 plate 1.25 82ps Fiesta.

These are a lot lighter than normal caravans and come in from 500 to 800+ Kgm in towing weight.

As far as I can see the Fiesta is only rated at 700 Kgm max braked towing weight, regardless of engine size. Why is this?

The Fiesta weighs in at approx 1000 Kgm so I would expect it to be able to tow 850 Kgm. A Fiat 500 with a 1.2 engine is lighter than the Fiesta yet has an 800 Kgm towing capacity.

Comments appreciated from Fiesta towers who have pulled micro caravans much appreciated, want to know how you got on before I spend thousands on a caravan.

Apologies if this question has been asked before.

I haven't towed anything however I would assume as long as you stick to the manual it would be fine. The only concern I would have is power

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Agreed, the NA 1.25 is already underpowered without the extra weight of the caravan,("gutless" mid-range flatspot, won't rev, overgeared) its going to really struggle up hills, it may be legal to tow "x" amount of weight but it does not mean it is practical, the ecoboost may have a similar "on paper" towing capacity, but the extra low-down/ greater torque & power and better power delivery will make it a far better proposition on the road

Personally i would use a much heavier car (eg Mondeo class) with a powerful diesel engine, then you can tow a larger, heavier roomier van (probably be cheaper/ easier to obtain than a more specialized "micro" caravan)

Alternatively you could look at a collapsable trailer caravan thingy (less drag and lower wieght but folds up to a bigger size)

or invest in a motorhome - may not cost a lot more than a micro caravan