British people are responsible for a third of all unsecured debt in Western Europe, a report out today shows.

The average Briton owes £3,175, twice as much as the £1,558 owed by their average European counterpart.

Unsecured UK lending - such as on credit cards, personal loans and overdrafts, but not including mortgages - reached £214 billion last year, making Britain the most indebted nation in continental Europe.

This is compared with a combined total for Western Europe of £600 billion.

France, which came second in terms of its unsecured debt, was still only half the size of the UK market. Total personal debt in the UK including mortgage debt is estimated to be £1.2 trillion.

The research from analysts at Datamonitor attributes the high level of British debt down to the UK’s buy-now-pay-later culture and it "insatiable appetite for credit", compared to major countries on mainland Europe which have a culture of savings and frugality. People in France and Germany are particularly averse to debt, according to analysts.

However, this situation is likely to change, with the UK consumer credit market reaching a "saturation point" at which banks will eventually be unable to loan Britons much more than they are doing at present.

By contrast, consumer credit growth in Western Europe is growing fast, at a rate of 8.3 per cent per year over the last five years compared to 2.7 per cent for the UK, providing new opportunities for lenders, the report says.

Paul Marsh, financial services analyst at Datamonitor and author of the report, said: "UK lenders looking for business opportunities should look overseas to realise their expansion plans.

"The UK is an increasingly difficult place to do business, due to the highly indebted nature of the population. Yet in other European countries consumers are not as indebted and the markets are not as sophisticated."

While the UK market is expected to continue growing at a slower pace than major European countries such as France, Ireland and Spain, the fastest growing markets are Turkey and Greece, according to Mr Marsh.

"These markets are where the real opportunities exist, but only for players brave enough to enter," he said.

After recovering from an economic crisis in 2001, unsecured borrowing in Turkey rose by 52.3 per cent per year on average over the past five years, while in Greece it grew by 28.8 per cent.

One of the reasons highlighted for Turkey’s consumer credit growth, is that it has a very undeveloped mortgage market, and hence, unsecured borrowing accounts for the vast majority of outstanding debt.

After the Office of Fair Trading’s decision to force credit card firms to cut penalty fees for defaulters, providers have turned to other ways to boost profits. Research released on Monday by Moneyfacts, a personal finance information company, found that 19 card providers had increased interest rates in the last three months, some by as much as 12.1 per cent.

Lisa Taylor, an analyst at moneyfacts.co.uk, said: "Rising bad debts and the lost fee revenue has left many providers with no choice but to look for alternative avenues for income. And it seems raising interest rates is a popular option.

"For many consumers this rise may go unnoticed but, should they take the time to look at the long-term consequences, they could be in for a nasty surprise."

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