It is the view of the Foundation for Information Policy Research that Phorm's system would leave the ISPs open to class action suits and charges of processing data illegally. Furthermore, under Europe's comprehensive data protection laws, the use of such a system requires the explicit permission of individual customers using an "opt-in".
See this article about the illegallity of Phorm for more.
Notice also that one of the comments to the article is a person working for Phorm, who basically says "We don't care about your laws. We are Americans and we want to make money out of you. You will enjoy getting even more advertisements rammed down your throat."
I suggest
You protest
Here is a site
That helps the fight
(This poetry stuff is a doddle.)
If not, here is something that you may find useful (if you use Firefox) it's a Firefox extension called "Dephorm". 
I'd just got there too when I read this: the Data Protection Act requires an opt in, if I recall. I should know, having been required to, but I believe they have to provide information on personally identifiable information they hold on you if requested.
Class action possible there!!! If only everyone getting together and swamping them with DPA requests in protest!