E-business leaders have threatened to withdraw their goodwill and stop co-operating with the Government if the Regulation of Investigatory Powers (RIP) Bill is passed next week.
Employers body the CBI was hoping to get last-minute amendments passed in the Bill's closing stages.
Tim Conway, policy director of the Computing Services & Software Association, said the legislation was still "fundamentally flawed," despite amendments passed by the House of Lords last week.
"We need elements of the Bill to promote security. Therefore, we want the Bill suspended to allow time for business and government to talk to each other," he said.
n The US government has edged towards the UK position on wiretapping through the RIP Bill by calling for updated laws to extend the powers of law enforcement to the online world while providing legal protection for electronic communication.