The “debt time bomb” warning came from independent economists Capital Economics, a London-based consultancy that provides analysis and advice on the state of the UK and world economies for financial, industrial and commercial companies.

It follows figures which show that the UK experienced its largest single increase in debt — £116 billion — last year since the Bank of England was founded in 1694. Britain’s personal debt is now increasing by £1 million every four minutes.

This year started with record levels of debt and those have continued to mount.

At the end of May, the nation’s personal debt was just over a trillion pounds and it is expected to break through the £1.1 trillion barrier when the Bank releases figures for June.

The average owed by every man, woman and child in the UK (including mortgages) is now almost £18,500.

Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans increased to £4071 for the average UK adult at the end of May 2005.

This figure translates into a 10% increase on the previous year’s levels and a 45% increase since 2000.

There are now more credit cards in the UK than people and a quarter of those in debt are receiving treatment for stress, depression and anxiety from their GP.

Capital Economics economist Vicky Redwood said personal bankruptcies were higher now than in the early 1990s when thousands of homes were repossessed across the country.

Recent statistics have shown that bankruptcy figures increased by 28% year-on-year in the first quarter of 2005 and repossession orders for mortgage arrears rose 25% in the same period.

She said, “It is unlikely that the numbers have peaked but we estimate that households must be feeling the pain of borrowing too much.

“People are paying the equivalent of about 20% of their disposable income on interest and debt repayments — the highest since 1990.

“Fortunately for Scotland, it hasn’t experienced the recent rise in unemployment that has occurred elsewhere in the UK but the situation for people living in Dundee will be just as critical as it is in many other parts of the country.

“We are going to see people being forced to cut back on their spending to deal with the financial commitments they’ve built up.

“We won’t see the massive rises in house repossessions that took place in the early 1990s because we are not going to get the interest rate shock we had then.

“However, there is no doubt that people will have to tighten their belts.”

Money education charity Credit Action has estimated that as many as 10,000 Dundee adults could be experiencing “serious” financial problems that will leave them with difficulty paying their bills.

The charity believes that the city’s collective personal debt is around £3 billion and that, in common with people across the UK, Dundonians are sitting on a “debt time bomb”.

Credit Action national director Keith Tondeur said, “A tenth of the adult population in Dundee will be having the kind of problems that will keep them awake at night and lead to court judgments being issued against them.

“People need to take action now if they are in difficulty. Don’t ignore things and don’t borrow more money to get out of debt.”