The findings confirm one of the main arguments made by enthusiasts for the euro - that price comparisons will be easier under a single currency, helping consumers because of increased competition among manufacturers and retailers.
The results, from the survey commissioned by Dresdner Kleinwort Benson, a City of London investment bank, also show that British consumers would have more to gain than most other Europeans from joining the euro.
"The development of a competitive single market for goods and services across Europe is leading to convergence in retail prices," said Julian Callow, author of yesterday's report. But he said there was a long way to go before price differentials narrowed to those prevailing in the United States.
On average, British shoppers are paying prices 25 per cent higher than their counterparts in euroland.
Only Sweden shared the UK's title as a high-price country across a wide range of goods. In most categories, a shopping basket of goods cost more in London than any other European capital, whether or not VAT was included.
Even in the case of high- profile branded goods sold across Europe, Britain often emerged as the most expensive place to shop. For example, a 1.5 litre bottle of Coca Cola costing 1.42 euros (93p) in London was only dearer in Stockholm (1.63 euros), compared with 1.09 euros in Paris and 1.22 euros in Frankfurt.
The Spice Girls CD Spice World cost 24.22 euros in London, almost the same as Paris. But it was cheaper in every other country, costing just 17.50 euros in Stockholm.
In some categories the price differences are extreme. A sample group of well-known videos and CDs including Disney's Hercules and the Best of U2 album was 60 per cent more expensive in London than Madrid, the cheapest.
The findings of the report, one of the most comprehensive published since the launch of the euro, will reinforce the Government's determination to get to the root of high retail prices in Britain. The Department of Trade and Industry is due to publish a consumer White Paper shortly, and the Office of Fair Trading is investigating car dealers and supermarket pricing. A European Commission survey of car prices last November found that British prices are by far the highest in Europe.
However, the Dresdner Kleinwort Benson survey shows that British consumers are penalised across a much wider range of goods.
In addition, comparisons with a smaller November 1998 survey and earlier official price figures suggest that prices on the Continent are growing closer, and converging on the lowest level.
Even on the Continent prices vary much more widely than they do between US states. In America, prices vary in a 10 per cent band in contrast to the average 25 per cent variation in Europe.
For instance, Gap clothes hardly vary in price around the US, but do vary considerably across Europe. As every British visitor to the US knows, the clothes cost about the same in dollars as they do in pounds.
But the same is true for many other goods. John Grish-am's novel The Client costs $7.99 (7.65 euros)in Washington and 8.56 euros in London.
Mr Callow predicted that Europe would go the way of the US partly because incomes per head would become more equal on this side of the Atlantic, but also thanks to competition under the single currency.
SHOPPING BASKETS ACROSS THE CONTINENT
The researchers put together six shopping baskets, each containing a range of goods in a particular category. They then compared the cost of buying these goods in nine European cities. London came out the most expensive in all but two of the examples.
Food and personal products
Clothing and footwear (boots trainers, jeans)
Media and entertainment (videos and CDs)
Miscellaneous electrical (batteries and film)
Electrical products (domestic)
Total product basket (combined cost)
On average, the British pay 25% more than European counterpartsReuse content