Vince Cable, the business secretary, will say on Wednesday that government plans to block illegal filesharing websites under the controversial Digital Economy Act are in effect unworkable.

Outlining the government's response to the Hargreaves report on the future of UK copyright law, Cable is also expected to announce legislation to sweep away restrictive rules on file copying and parody works.

In a speech at the British Library on Wednesday, the Liberal Democrat minister will outline the next steps for the introduction of the delayed Digital Economy Act.

Cable will row back on one of the act's most contentious measures – introducing legislation to block access to copyright-infringing websites – and instead suggest that the existing Copyrights, Design and Patents Act is powerful enough.

That follows last week's landmark high court ruling, which forced BT to cut off access to Newzbin2, a site found to be infringing copyright "on a grand scale".

Cable's intervention comes as ministers struggle to implement anti-piracy measures outlined by the Digital Economy Act rushed through by the Labour party at the end of its time in office.

The first warning letters to be sent to Britons accused of illegal filesharing are now not due until the second half of 2012 – more than a year later than originally planned.

A series of legal challenges have meant that cutting off the internet connections of serial pirates is unlikely to begin until 2013 at the earliest.

Cable is also expected to announce a "scoping review" into the viability of a setting up a digital copyright exchange, one of the key proposals of the Hargreaves report published in May – in effect kicking the idea into the long grass.

The rights exchange, which would effectively be a one-stop shop to make lawful use of copyrighted material easier, received "serious pushback" from media companies, according to one industry source. Film and music companies and broadcasters are understood to have raised a number of issues about the proposed exchange, including fears that it may contravene various European regulations by forcing all rights holders to participate. One industry source said that if it was a full "stock exchange" trading platform it may not generate as much revenue as selling rights directly.

The government is anticipated to legislate to sweep away many of the UK's archaic intellectual property restrictions that make it technically illegal to transfer content from CDs or DVDs to other formats, such as iPods. The reforms will also make it legal for Britons to burn copies of music and video files for family members to use, and give legal protection to spoof works.

Cable has previously said that private copying is carried out by millions of people who are "astonished" that it is technically illegal. He said: "We need to bring copyright into line with people's expectations and update it for the modern digital world. This will free up innovative British businesses to develop new consumer technology and help boost economic growth."

Cable is expected to outline further changes to the DEA, including how costs are apportioned between rights holders and ISPs. The judicial review ruled in April that ISPs should not foot the bill for setting up an appeals body.

Ed Vaizey, the communications minister, is understood to have set a date of mid-September to get ISPs and rights holders to another roundtable meeting aimed at curbing infringing sites voluntarily.

However, many rights holders are dismayed at the delays in implementing the Digital Economy Act. "What we would very much like is the government to get on drafting and writing the code that goes with the DEA and to fast-track the legal process so it doesn't take hundreds of thousands of pounds and a long time to sort these things out," said Lavinia Carey, director general of the British Video Association.