In this country, you're allowed to copy CDs for personal purposes only. That includes making backup copies. However, you are not allowed to sell them on or use them for public performance (which is the same as for 'legit' CDs anyway).
You're not allowed, technically, to make a copy for a friend, but it goes on. Some people get really uptight about it, but I have spoken to artists who really don't mind it happening at this level.
Q 2.3 I was only selling back up copies on CD-R, surely this is allowed? A. You are not allowed to make a copy of a sound recording in the UK (under the Copyrights, Designs & Patents Act 1988), whether it is for back up or otherwise.