New figures released by the BPI show that almost three quarters of all music downloaded in the UK this year were done so illegally.
The Digital Music Nation report found 1.2 billion tracks were illegally downloaded by 7.7 million people throughout 2010, amounting to a loss of around £1 billion for the music industry.
“Illegal downloading continues to rise in the UK," said BPI chief executive Geoff Taylor. "It is a parasite that threatens to deprive a generation of talented young people of their chance to make a career in music, and is holding back investment in the fledgling digital entertainment sector."
The report found that legal downloads are also on the increase, with digital downloads now accounting for 24.5 per cent of all music sold in the UK, up from 19.2 per cent in 2009.
Digital single downloads rose from 150 million in 2009 to 160 million and album sales were up by about 5 million from last year to 21 million in 2010.