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UK businesses are celebrating the government's decision to drop controversial plans to give law enforcement agencies the "keys" to decipher encoded information travelling over the Internet.

They were strongly opposed to the "key escrow" standard being included in a forthcoming e-commerce Bill.

Objections ranged from invasion of privacy to the impracticalities of introducing it and a lack of confidence in the system.

The computer industry, especially, was deeply unhappy, arguing that few business partners and customers would trust encryption when the key had been given to someone else.

Business concern

The British Chambers of Commerce (BCC), the Confederation of British Industry, the Post Office and civil liberties groups on the Internet had previously expressed fears.

Chris Humphries, director general of the BCC said: "We do understand the government's concern over trying to regulate e-commerce.

"However there was a real danger that UK business would lose out to foreign competitors.

"The "key-escrow" standard was basically unworkable because criminals could easily get around it if they wanted to.

"It would have been crazy to hobble legitimate UK business in the meantime."

The Alliance for Electronic Business also welcomed the decision.

Chairman Peter Agar, who is also Director General of the CBI said: "Establishing a framework within which electronic commerce can be used confidently by businesses and consumers alike is vitally important to UK competitiveness."

Boom in Internet trade

Selling to customers, buying from suppliers and finding new clients via the Internet is expanding at rapid pace in the UK and Europe.

Forrester Research, a leading independent firm which analyses the impact of technology on businesses, estimates that e-commerce in Europe will reach $7.9bn in 1999 and will surge to $64.4bn by 2001.

In the United States, business to business trading of goods over the Internet will surge to $1.3 trillion by 2003 - an annual growth rate of 99%.

Therese Torris, director of new media analysis at Forrester Research, says industry in Europe needs to take the bull by the horns and start tackling the problem of ensuring Internet security themselves.

She said: "It's a case of 'Ask not what your government can do for you? Ask what you can do for your government'.

"The EU must move fast to remove the obstacles presented by the current legal patchwork and create a more predictable environment for Internet commerce.

"Failing to do so risks reducing the potential of the Internet economy in Europe by as much as a third in 2003."