Britain could follow France in cutting internet access to users who repeatedly download music or films illegally.
The Government had given the music and film industries a year to come to a voluntary agreement with ISP's (Internet Service Providers) over how to tackle illegal file sharing, but that timeframe expired at the end of 2007.
With no sign of an agreement in place, it is due to publish its options in a strategy document in the coming weeks and a separate consultation later in the year to examine how it can cut down on piracy.
One suggestion put forward by the music industry is to adopt the French model, where warning messages are sent to those who frequently download music or films illegally.
If the messages are ignored, users can have their accounts suspended or closed altogether.
The body representing ISP's says they would prefer a voluntary agreement but the music industry argues it has been forced to demand legal action after rampant Internet piracy rocked its traditional revenue model.
A report last week suggested ISPs could be legally required to take action against users who accessed pirated material.
An alternative system would be based on filtering, which could block illegal files from being downloaded.
Global music sales were down around ten per cent in 2007 and the international music trade body, the IFPI group, estimates that tens of billions of illegal tracks were swapped in the year.
But John Kennedy, the head of the IFPI, said the mood was turning toward ISPs having to take more responsibility for cracking down on illegal activity.
"It is simply not acceptable for ISPs to turn a blind eye to the piracy on their networks which is at such a rate that there are 20 illegal music downloads for every legal track sold," he said in a statement.
"Record companies have licensed more than six million tracks to over 500 legal services and consumers can now legitimately get access to music online in a wide variety of ways.
"If the French and British governments take action and others follow, there will be more room for the legal market to grow as services will not have to compete with the something for nothing' deal available on the illegal networks that do not invest a penny in generating new music."