Many Britons are living dangerously close to their financial limits and would be unable to cope with another rise in interest rates.

A report by internet bank Cahoot found that 27 per cent of Britons said even a small increase in their spending, such as paying for a holiday, would cause financial strain.

Regional research showed that contrary to the widely-held belief that southerners are better off, people in the south were feeling more financial pressure than their northern counterparts.

The Welsh topped the league, with 30 per cent admitting to living without any financial cushion.

Scots were the best at living within their financial boundaries, with four per cent having concerns about the impact of small increases in spending.

However, money worries did not stop 37 per cent of people buying things they cannot afford.

East Anglians were most likely to risk toppling into debt, with 36 per cent prepared to overspend.

Cahoot marketing director Deborah Cutler said: "We have a 'live for the day' culture, where the fun of instant spending trumps the pain of financial planning.

"Large parts of the UK are living right up to, and beyond, their means without any long-term savings plans.

"This is despite warnings that we need to save more than 20 per cent of our earnings in order to ensure a comfortable retirement."

Dr Don Slater, from the London School of Economics, said: "The long-term future often involves financial products and practices that people do not feel comfortable with, either because there is too much risk attached or they do not feel they have the time or the ability to master them.

"This could be because we live in a consumer society based on funding present-day lifestyles rather than long-term accumulation of security. The report shows that we seem to have less belief in the long-term future and distrust pensions and shares."