Around 7.7m people have illegally downloaded music this year, according to research commissioned by the British record industry's trade association.
Its latest report suggests more than 1.2bn tracks were pirated or shared, costing the industry £219m.
Geoff Taylor, of the British Recorded Music Industry (BPI), said illegal downloading was becoming a "parasite".
Yet campaigners for consumers' digital rights claim its call for new anti-piracy legislation is "immoral".
According to Jim Killock of the Open Rights Group, the industry was calling for measures "that would curtail innocent people's human rights in order to increase their profits".
The BPI's research, based on internet users' habits, claims that more than three quarters of music downloaded in the UK is illegally obtained, with no payment to the musicians, songwriters or music companies producing it.
This is despite a digital music market in the UK which is served by 67 legal downloading services.
The report said that illegal mp3 pay sites and cyberlockers - sites offering space to store illicit files - are "rising alarmingly".
It added there is still no effective deterrent against illegal downloading .
"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 burgeoning digital entertainment sector," Mr Taylor said, adding new legislation was "urgently needed".
He called for swift action be taken to help "Britain to achieve its potential in the global digital market".
'Saving pocket money'
Mark Mulligan, an analyst in the online distribution of music, said: "The music industry has been fighting hard against piracy for over a decade, but they haven't managed to stem the flow.
"The reason for that is because technology moves much more quickly than counter measures."
There is now a generation that believes music is available to download for free on the internet, he added.
This generation, he said, had never experienced the concept of "saving their pocket money to buy a record, which is why file sharing is never going to go away".
Earlier this year the BPI reported music sales in the UK had grown for the first time in six years.
It said legal downloads had seen sales rise by more than 50% to £154 million, compared with £101.5 million in 2008.
They are expected to reach 160 millions sales this year, an increase of more than 10 million in 2009.
This year also saw I Gotta Feeling by Black Eyed Peas become the first single to sell more than one million digital copies.
But the BPI's call for new legislation cut little ice with Mr Killock, whose organisation "aims to raise awareness of digital rights and civil liberties issues".
"The BPI are whinging that massive growth in their profits in the middle of a recession isn't good enough," he said.