England's hopes of progressing in the ICC World Twenty20 suffered a major setback after a middle-order collapse condemned them to a five-run defeat against New Zealand today.

Chasing New Zealand's competitive total of 164 for nine, England seemed on course to claim the victory which would have boosted their chances of reaching this weekend's semi-finals.

But after reaching 72 for one at the halfway stage of their reply, they suffered two mini-collapses at vital times and were restricted to 159 for eight - Hampshire's Dimi Mascarenhas out first ball.

Today's setback means England now have to win tomorrow's match against India and hope other results go in their favour to have any chance of qualifying for the semi-finals on run-rate.

The result, though, means New Zealand are through to the last four.

England lost four wickets in as many overs to slump to 106 for five with 6.2 overs remaining, and then lost three more wickets in quick succession in the dying overs.

They had enjoyed their best start of the tournament with Darren Maddy, recalled in place of Jeremy Snape after missing out against South Africa, teaming up with Vikram Solanki in a 62-run opening stand.

Solanki, drafted in as emergency wicketkeeper after Matt Prior was ruled out with a fractured thumb, kept well behind the stumps and then proceeded to hit 24 off 25 balls before driving to long off.

Maddy, though, put his struggles earlier in the tournament behind him to hit 50 off 31 balls before being run out in a mix-up with Hampshire's Kevin Pietersen to start the collapse.

Paul Collingwood followed two overs later after driving to extra cover and Pietersen, returning to the ground where he began his first-class career, was bowled around his legs attempting to sweep New Zealand captain Daniel Vettori.

With Andrew Flintoff falling two balls later after a mix-up with Owais Shah, England's momentum was lost when Luke Wright, who had been relegated down the order after failing in his three innings in the top three, arrived at the crease.

He hit Scott Styris down the ground for six and added 42 with Shah before another collapse ended England's challenge when the Middlesex batsman was run out by Daniel Vettori attempting a scrambled second run.

Mascarenhas and Luke Wright followed in the next over as England lost three wickets for four runs and needing 16 off the last over, Chris Schofield and Stuart Broad were only able to add 10 runs.

England had begun the day positively by winning the toss and exploiting early morning conditions to claim early wickets and leave New Zealand reeling on 31 for four.

But a determined 60-run stand off 42 balls between Styris and Craig McMillan put New Zealand back on track and guided them to their winning total.

Batting cautiously at first, the pair accelerated at the halfway stage of the innings with Styris hitting Mascarenhas, who had a match to forget, for three successive sixes as New Zealand added 44 runs in three overs.

A brilliant piece of fielding from Maddy swung the momentum back in England's direction just as New Zealand had set their sights on a major score.

Pushing for a quick second run, Styris was left short of his ground after a brilliant pick-up and direct throw from Maddy at mid-wicket to run him out for a 42 off 31 balls.

Not content with that, Maddy then claimed two wickets in four deliveries as Collingwood threw him the ball in the 17th over and he prompted responded by having McMillan caught at long on for 57 off 31 balls with his second ball.

Two balls later the dangerous Jacob Oram was bowled trying a big heave down the ground and, with Collingwood also bowling Shane Bond in the next over, New Zealand were unable to exploit the foundation set in the middle overs.

But with captain Vettori hitting an unbeaten 17 off nine balls, New Zealand were able to pass 150 and post a total which ultimately proved beyond England.