Ed Sheeran, Dua Lipa and Sam Smith are among the British artists driving a surge in exports as the UK music industry grew across every sector in 2018, UK Music's new Music By Numbers report said.
The study said the total contribution of the UK music industry to the economy last year was £5.2 billion, up from £4.5 billion the previous year.
The total export revenue of the British music industry was £2.7 billion, up from £2.6 billion.
Despite the challenges facing the industry, such as concerns about Brexit, rising business rates and issues of enforcing copyright in an increasingly complex online market, the live music sector and employment in the industry have also continued to flourish.
Employment in the industry hit an all-time high of more than 190,000 jobs in 2018, with 139,352 in the music creators sector, which includes musicians, singers, composers, songwriters, lyricists, producers and engineers.
The live sector made a contribution of £1.1 billion to the economy as fans filled venues across the country despite the absence of the Glastonbury Festival, which took a break last year when the data for the report was collected.
This was a growth of 10 per cent from £991 million the previous year.
The numbers were boosted by a rise in the number of other major festivals such as TRNSMT and Sunday Sessions in Scotland.
Music tourism - which involves people travelling from within the UK and overseas to attend a live music event - has also grown. It contributed a £4.5 billion spend to the UK economy, up 12% from £4 billion.
UK Music chief executive Michael Dugher said the findings show the industry "is in great shape and continuing to lead the world".
He added: "The figures are hugely encouraging and show that, as well as enriching the lives of millions of people, music makes an incredible contribution to the UK's economy.
"Live music is now at a record high and continues to draw millions of fans from both the UK and abroad to our arenas and smaller venues alike.
"Music exports are another amazing success story with the best of British creative talent being showcased across the globe.
"However, this is not a time for complacency. We face many challenges to ensure we keep our music industry vibrant, diverse and punching above its weight.
"We need to do more to protect grassroots venues by helping them combat soaring business rates. We need to nurture the talent pipeline, including by reversing the decline of music in education, so that children from every background have access to music."
Mr Dugher said music creators need to get "fair rewards for their content" and must not be "ripped off by big tech".
"And we urgently need to ensure that the impact of Brexit doesn't put in jeopardy the free movement of talent, just at the time when we should be looking outwards and backing the best of British talent right across the world," he added.
In the report's foreword, Culture Secretary Nicky Morgan hailed "exciting new artists like Sam Fender, Dave and Little Simz", who are achieving "great success, and the figures in this report are testament to the outstanding creativity of our world-leading artists".
Mrs Morgan said: "We need to work together to ensure this success continues," adding: "We know there are also some specific challenges for the music industry.
"From protecting intellectual property to safeguarding the grassroots sector and growing the talent pipeline, the Department for Digital, Culture, Media and Sport will continue working with UK Music to allow this country's music industry to grow and flourish."