EU plans to make telecommunications companies store details of calls and e-mail traffic for a year or more were criticised by the industry on Thursday.
More than 50 died in the 7 July attacks on London
European interior ministers meeting in Newcastle heard that the measure would be hugely expensive and would violate EU data protection laws.
The proposal is part of an EU plan to fight terrorism, and the UK had hoped it would become law by the end of 2005.
Home Secretary Charles Clarke said it was a "tricky political question".
Earlier in the day he had expressed confidence that the concerns harboured by some EU countries - about the cost and invasion of civil liberties - could be overcome by the end of the two-day meeting.
"We don't think either of those issues are justified, though we understand them," he said.
Mr Clarke has said no record would be kept of the content of conversations.
The idea is for telephone companies and internet providers to keep information on the sender, receiver, time, place and length of any communication.
The UK is also keen that companies log calls when the line is busy or there is no answer, on the grounds that unanswered calls can be signals to detonate bombs.
The director of the European Telecommunications Network Operators' Association (ETNO), Michael Bartholomew, who briefed the ministers in Newcastle, said this would be very costly.
"The implications of this package are very considerable and it seems to me that we are talking about hundreds of millions of euros on a pan-European basis," he said.
He also said that the proposal that companies should record the location of callers was currently outlawed under European law.
The EU ministers are reported to be considering several proposals, under which the data would be kept for six months, one year, or three years.
German Justice Minister Brigitte Zypries said governments also needed to decide who would foot the bill for implementing the measures.
"Industry will take the position that this is something the state must pay for," she said.
Mr Clarke said government could meet some of the costs involved.
The rules would apply to a large range of equipment including land lines and mobile telephones, text messages, e-mails and internet protocols.
EU interior ministers agreed to this in principle at an emergency meeting just after the London bombings.
Currently telecoms firms in Germany are not obliged to keep the records of telephone calls or e-mails.
The length of time for retaining such records varies from two months in the Czech Republic to four years in Italy.
"Getting some kind of uniformity across Europe is important because this is such an important technique in how we solve serious crimes and in dealing with counter-terrorism," Mr Clarke said.
Britain is hosting the Newcastle talks - a meeting of the EU Justice and Home Affairs council - in its capacity as the current holder of the EU's rotating presidency.