BBC Industry Correspondent Rory Cellan-Jones: Concern over Internet piracy

The biggest report undertaken into the state of the industry shows that it contributed £3.2bn last year, and was a significant net earner overseas.

There is concern that these figures could be hit in the future by the unauthorised downloading of music from the Internet.

Major figures in the industry, including performers such as Robbie Williams and Boyzone, have been pressing the Government to improve copyright protection to take into account the availability of music to download from the Net.

But reports of the death of the British music industry, most notably from Creation Records guru Alan McGee, appear to be greatly exaggerated, if the figures in Tuesday's report are any reflection of the industry's health.

The survey, by financial advisors KPMG, shows that total domestic spending on music in the UK was £3.7bn in 1997/8.

Adam Shaw looks at the figures thrown up by the survey

The UK music industry also made net overseas earnings of £519m.

Its 15% share of the world music market makes it the UK's third largest export in terms of global share, behind malt whisky and Formula One.

The report also showed:

• 130,000 full-time jobs are supported by the industry

• Consumer spending on live performances was £633m

• The value of the music recording sector was £521m

• Spending on musical instruments was £450m

"This report now confirms that the UK music industry has an economic status to match its cultural status.

MP3 players could be a threat to profits

"We hope the report will become a useful tool in the hands of the industry, gaining proper recognition of its contribution to UK plc."

The report was commissioned by the National Music Council, which promotes music in the UK.

Council chairman Russell Jones said despite the healthy figures, the industry still needed support in the battle for future markets.

He said: "The Government has a key role in recognising the needs of the music business in relation to export promotion, encouraging equal competition, helping identify the threat posed by piracy, and ensuring these issues can be addressed through the enforcement of strong international copyright legislation."

Tighter controls

More than 210m albums were bought in the UK in 1998, with George Michael's Ladies & Gentlemen topping the sales charts.

David Murrell on BBC's Business Breakfast: Report highlights music's importance to the economy

However, singles sales fell by 14%, and the industry fears the impact of high-quality MP3 computer files, increasingly available to download.

The music industry itself has latched on to the potential of selling music over the Net.