The Business Software Alliance (BSA) says the penalties for software piracy in the UK are not sufficient, after reporting that 27% of PC software installed in 2006 was illegal.

The figure has remained unchanged for three years in a row, suggesting that many software counterfeiters and users of unlicensed software remain undeterred by legal and financial threats. The BSA recommends higher financial penalties for those who use illegal software.

According to the BSA, the UK's 27% piracy rate results in a loss to local and international software publishers of $1.67 billion (£841m).

"The UK remains in a situation where almost one out of every three software installations is illegal," said Sarah Coombes, director of Legal Affairs, BSA EMEA. "This is costing the software industry billions of dollars and putting UK businesses at risk. Despite attempts to educate businesses, and increased efforts to enforce the licensing laws by the government and the industry, it is clear that more must be done."

The BSA said the impact of the internet on illegal software downloading is also of serious concern, suggesting consumers and students are no longer the only ones to blame. Small businesses are increasingly using the internet to find 'cheap' software packages, according to the BSA.

Across Western Europe, the piracy rate has decreased by one point to 34%. Piracy rates in Central and Eastern Europe (CEE) also dropped by one point to 68%, but due to faster economic growth, losses increased massively by $862 million to $4.1 billion.