The music industry is preparing to back down from its demands that people caught downloading songs illegally be disconnected from the internet after a revolt by leading musicians.

UK Music, the body that represents the British music scene, will release a statement today clarifying its stance on file-sharing. It has been forced to drop any mention of cutting off internet connections, to ensure unity across the industry.

The move comes after the Featured Artists Coalition (FAC), an influential group of musicians that includes members of Pink Floyd, Radiohead and Blur, told The Times that plans by Lord Mandelson, the Business Secretary, to suspend the connections of those caught sharing music were “grossly disproportionate”.

The FAC’s stance has polarised the industry, with record labels, which strongly support Lord Mandelson’s proposals, enlisting other artists to condemn the group. Lily Allen, the singer, wrote on her blog yesterday that “music piracy is having a dangerous effect on British music”.

She said: “Last week, in The Times, these guys from huge bands said file-sharing music is fine. It probably is fine for them. They do sell-out arena tours and have the biggest Ferrari collections in the world. For new talent, though, file-sharing is a disaster as it’s making it harder and harder for new acts to emerge.”

Lord Mandelson’s intervention came only two months after the Government’s Digital Britain report, published in June, failed to back disconnection as a deterrent for pirates. Instead it proposed giving Ofcom, the media watchdog, powers to direct internet service providers to block pirate websites or “throttle” the speed of internet connections. The Times has obtained a draft copy of the UK Music statement to be released today. It markedly makes no mention of disconnection, stating: “In context of an evolving licensed digital music market, we believe that government intervention is extremely welcome and that, subject to assessment, Ofcom should be granted appropriate and proportionate powers as directed by the Secretary of State.

“The purpose of these powers is to encourage users of unlicensed P2P networks towards existing and future digital music services.”

Those close to the drafting of the statement said it had been necessary to drop demands for disconnection. A source said: “One way for this to be derailed is for the music industry to have a great big row. If it’s a case that the entire industry agrees over everything but one tiny point of detail, then maybe it’s worth making that point.”

The FAC, which is not affiliated to UK Music, is still engaged in meetings with various parts of the industry in an attempt to reach a compromise.

The group met with Sony and EMI and a group of artist managers on Monday evening in what all parties described as “constructive” talks.

At the same time, Jeremy Hunt, the Shadow Culture Secretary, criticised Lord Mandelson, saying that the peer had “gone for the soundbite”.

“Do we really want to prosecute someone that does a video of their cat with a Beatles soundtrack behind it and posts it on YouTube?” he asked.

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