Ministers have turned down police requests to set-aside £50m to support plans for the UK's first national high-tech crime unit.
The news comes as a blow to businesses that claim to be losing millions of pounds from the activities of hackers, viruses and cyber fraud.
A survey by Intergralis of directors in 800 FTSE 1,000 companies showed that more than 50% of companies claim to have lost thousands of pounds due to cybercrime. However, many incidents are going unreported.
Police intelligence chiefs have been pressing the Government to ring-fence the money to create local police cybercrime units to support the new organisation. They expect local forces to play a key role in the proposed high-tech crime unit, which has the backing of the National Criminal Intelligence Service (NCIS) and the Association of Chief Police Officers (ACPO).
Under ACPO proposals, the high-tech crime unit will allow police forces, Customs & Excise and other law enforcement agencies, to work together with IT suppliers and businesses to fight computer crime.
NCIS expected the Government to ring-fence £50m for local police forces to buy IT equipment and train officers in computer forensics in last month's spending review. But the Home Office took police intelligence chiefs by surprise by awarding forces 10% in their funding rather than a specific budget to fight IT crime. The decision has raised fears that cybercrime may take a back seat.
Two years ago the prime minister Tony Blair promised practical measures against the threat of high-tech financial fraud at a G8 summit. And this May, home secretary Jack Straw used the problem of Internet-based crime to justify the controversial Regulation of Investigatory Powers Act.
One source close to the negotiations claimed that NCIS had failed to persuade the Treasury that businesses were genuinely concerned about cybercrime.
NCIS said this week that it was disappointed that no ring-fenced money would be available for the unit.
"We are now in the persuading business. We have to sell the idea to police forces that they should invest some of their money in high-tech crime," said a NCIS spokeswomen.
The news was greeted with disappointment by the software and services industry, which believes that greater co-operation between the police and the IT industry through the new unit could significantly reduce the impact of computer crime.
Tim Conway, policy officer for the Computing Services & Software Association, said that he would be writing to ministers to urge them to reconsider.
NCIS said it was still optimistic that the Government would make funds available for the new unit when its budget comes up for renewal in April next year.