The overall cost to the UK economy from cyber crime is £27 billion per year, according to a report commissioned by the Cabinet Office into the integrity of computer systems and threats of industrial espionage.

The report, by information consultants Detica for the Cabinet Office, calculated that the theft of intellectual property - such as designs and formulas - from businesses costs £9.2bn. Pharmaceutical, biotechnology, electronics, IT and chemicals firms are being hit hardest.

Industrial espionage, including firms spying on each other, is said to cost £7.6bn. Cyber crime also costs citizens £3.1bn a year and the government £2.2bn a year, the report said.

With society now almost entirely dependent on cyber space, developing effective strategies to tackle cyber crime requires a better understanding of its impact. Its breadth and scale have been notoriously difficult to understand and past attempts to set cyber crime policy or develop strategies have been hampered by a real lack of insight into the problem, UK Cabinet Office said in a statement.

Neville-Jones said that the best response was to disrupt criminal networks rather than prosecute people. She told Guardian newspaper: I don't myself believe that the successful combating of this kind of crime is going to lie primarily through prosecutions.

I think it's going to be through much better defenses and disruption - screwing up their network. It doesn't have to be an offensive capability, but it's perfectly possible, as we know, just as an intruder can screw up a company's network, the reverse can happen.

He added, If you look at terrorism, if we'd relied on prosecution, we would have had lots of incidents by now. We have to rely to a very significant extent on actually disrupting the activity while in course.