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The Spanish archipelago has a reputation as a party destination, but the cost of living there is soaring for the thousands of Britons who call it home.

According to the latest figures from the Spanish National Statistics Institute, the Balearic islands of Mallorca, Minorca, Ibiza and Formentera are now home to almost 24,000 Brits.

But the cost of living has been climbing gradually in recent years. In Spain as a whole as in most large European countries inflation has taken its toll while wages have stagnated. A fall in the sterling to euro exchange rate has also affected expats, while Spain's well-publicised economic troubles mean the banks are reluctant to lend for personal or professional borrowing.

In the Balearics, where many goods are imported from the mainland and therefore more expensive the situation is even worse, with the popularity of the island pushing up property prices.

Expats Justine and Bruce Knox, who are based in Mallorca, own and run Knox Design. The islands are comparable to a city like London or Paris [in terms of price], said Justine. But I am sure there is still a small percentage of people who dont realise how much the islands have changed and still expect them to be a cheap destination."

Bruce agrees that expat life in the Balearics is expensive. Mallorca actually produces very little so we are really reliant on importing goods and that increases the price, he said.

Many expats on the islands choose to start their own businesses, but when it comes to getting financial advice, they are frustrated by the Balearic banks. A poll by Just Landed at the beginning of the year found that two-thirds of expats polled 64 per cent said that they do not trust local banks at all. They quoted "unfair" charges on their Spanish accounts as a cause for concern, while language can also be a major barrier especially as locals speak Catalan, not Spain's primary language, Castilian.

Its important that expats hoping to start businesses here have good financial, legal and business advice, said Telegraph Expat blogger Anna Nicholas. Social Security is pretty crippling here, and the bureaucracy can be exhausting.

But success stories can inspire potential expat business owners. Providing you are offering the right product and service to the right target market, it is an excellent place to run a business, said Justine. I do always recommend that, despite the potential to target English-speaking holidaymakers, it is still absolutely vital to be able to speak Spanish.

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Life's no party for expats in the Balearics