More than one in four software installations in the UK is illegal, according to a new report from the Business Software Alliance.

The organisation's 2008 Piracy Study (PDF) said that the amount of pirated software on PCs in the UK had risen to 27 per cent over the past year, clocking up its highest chunk of the market ever. The BSA estimates that the cost to British industry is £1.49bn.

Piracy also affects the end-user because it raises a number of security issues, and increases the risk of cyber crime, the report said.

"The recent global spread of the Conficker virus has been attributed in part to the lack of automatic security updates in unlicensed software," said the BSA.

"And in a 2006 study IDC found that 29 per cent of web sites and 61 per cent of peer-to-peer sites offering pirated software tried to infect test computers with Trojans, spyware, key-loggers and other tools of identity theft."

However, the BSA claims that it has increased the value of the punishments it metes out on behalf of its members by a factor of 25 since 2008.

"With more than one in four software installations categorised as illegal in the UK, we cannot afford to give up the fight against software piracy," said Alyna Cope, a spokesperson for the BSA UK country committee.

"Much more needs to be done by the industry and the government to warn businesses and consumers of the risks associated with under-licensed software from a legal, financial and operational point of view.

"Software piracy hurts our knowledge-based economy by weakening the very foundation on which it is built: respect for intellectual property and innovation."

The BSA is urging the government to establish a body that will focus on enforcement and education, and a code of practice that will encourage ISPs and rights holders to work together to stop piracy.

However, the BSA's suggestions were met with disappointment by Martin McNulty, client services director at the Forward Internet Group.

"The BSA's response to file sharing is at best naive and at worst dangerous, " he said. "File sharing is an enabling technology that is fast, efficient and here to stay."

Globally, the BSA found that 41 per cent of all installed PC software is pirated, and that the loss to companies is around £35bn.