Campaigners claim millions of shoppers are being led to believe the expensive shoes they buy in high-street stores are made in Germany and Italy – when many are actually made by workers on poverty wages in eastern European sweatshops.

The scandal is exposed in a damning investigation into the European shoe industry, which details illegal wages and shocking working conditions in factories turning out footwear for the UK market.

The investigation claims some big brands appear to be using a legal loophole, stamping their products with “Made in Italy” or “Made in Germany” to suggest they are high quality, when they have actually been made by poverty-stricken eastern European workers. The investigation found that footwear workers in Albania were earning as little as 49p an hour including overtime – which is an illegal rate even in such a poor country.

Workers in Macedonia, where the hourly wage was as low as 64p, described being taken to hospital in wheelbarrows after fainting in freezing factories where they had to work with strong chemicals. “If the employer needs to complete, let’s say, an order of 9,000 pairs of shoes, he will put 90 pairs on the belt and even if you want to die, you have to finish it,” a worker told researchers compiling the report, entitled Labour on a Shoestring.

It alleges that one Macedonian factory, which produced Geox shoes, was paying illegally low wages of €131 (£113) a month, with overtime. The legal minimum is €145 before overtime.

Geox shoes are available in the UK through John Lewis and House of Fraser, among other retailers. Geox did not respond to requests for comment.

Manufacturers are able to take advantage of an obscure European loophole known as the outward processing trade (OPT) scheme. Under the rules, companies cut parts for the shoes in one country before exporting them to a low-wage economy where they are assembled and sewn. They are then imported back to the original country, duty free. The finished shoes can then be labelled as being made in the original country.

The report, compiled by researchers from several European rights groups, is based on interviews with 179 workers in 12 factories. It condemns OPT as “a dead-end scheme for workers, national economies and businesses” and describes it as “an economic and social road to ruin”.

Researchers found that the factories produced shoes for brands including Zara, Lowa, Deichmann, Ara, Geox, Bata and Leder & Schuh AG and subsidiaries of CCC Shoes & Bags in Poland and Rieker and Gabor in Slovakia.

Bata did not address the allegations directly but welcomed the report, which it said had provided “interesting insights in the generally under-reported working conditions in eastern Europe”. The company said it expected its suppliers to comply with local laws.

The report looked at production in six low-wage European countries: Albania, Bosnia-Herzegovina, Macedonia, Poland, Romania and Slovakia. One in three of the Albanian workers questioned were paid less than the legal minimum wage of £121 a month, even with overtime and bonuses. The report indicated that women were generally worse off. Albanian workers reported having to work on up to 60 pairs of shoes a day.

Female workers in Romania said their husbands had to find low-paid seasonal work in the west to be able to afford wood to burn for heating during the winter. One man said: “Both my wife and I work in this factory. We are glad we could find work, but cannot imagine raising children on two factory wages. Our parents and relatives cannot support us, so we depend on this miserable wage. We wanted to move from the village to the city for a better life, but cannot afford to pay city rent from our salaries.”

Another worker, Krisztina, said her family had to keep livestock to feed themselves. “We have a garden and some animals. If I had to buy meat, like chicken breast from the shop, I would not be able to afford it. So, we must also take care of our animals every day because they are some of the only food we can afford.”

About 24 billion pairs of shoes are produced worldwide every year, including about 729 million made in Europe. But prices for European shoes are higher: an average Italian pair exports for £39, while an average Chinese pair exports for £3.

In a Macedonian factory supplying the Geox, Deichmann and Bata brands, workers said they were expected to use strong chemicals and complained of rheumatism, back pain, allergies and respiratory problems. They said their skin was often exposed to harmful chemicals because wearing gloves meant lower productivity and even lower wages.

Deichmann said it was not aware of issues with the factory, but was conducting its own investigation and would take any action necessary.

According to the report many workers complained of sweltering conditions in summer and freezing factories in winter. “My hands are freezing, I’m shivering all over and the door to the hall is open all the time,” one worker said. “If I get sick at work and if I have a car, somebody will take me to the hospital. But if I don’t have a car, then I will be taken in a wheelbarrow,” said another.

“In the summer, the heat is unbearable so we have had the ambulance here six times this year because co-workers had heat stroke,” said one Slovak worker.

If I get sick at work and I don't have a car, somebody will take me to hospital in a wheelbarrow East European worker

Dorel Mituletum, deputy mayor of Calafat in Romania, was also interviewed for the report and said of the factory workers: “The poor things drop like flies.”

One Romanian worker said that when three women were overcome by the heat at their factory her Italian supervisor joked that “he would have to improvise a cemetery in the back yard if the women continued to faint”.

Anna McMullen, from Labour Behind the Label, a UK-based workers’ rights group involved in the report, said consumers needed to be told the truth about where their shoes come from. “The clever ruse of shipping shoe parts out to low-wage countries to the east of Europe for assembly and glueing, before returning shoes for labelling as ‘made in Europe’, is duping consumers into thinking their products are made with dignity,” she said.

“In fact, we now know that workers in Albania and Macedonia are being paid wages so low that they cannot feed their families – so much so that the gap between the minimum and living wage is greater than in China. These out-sourcing methods used by some brands are turning mass profits on the back of worker poverty.”

McMullen said consumers tended to associate sweatshops with Asia, but the reality was that they existed much closer to home. “The need for fast fashion is bringing shoe production closer to home, and with it comes wage competition with Asia that mirrors, if not tops, the exploitation that we see elsewhere in global supply chains.

“Workers are earning less than a quarter of the wage that they need to live with dignity, despite toiling massively long hours to deliver stressful piece-rate targets. ‘Made in Europe’ no longer means ‘made with dignity’.”

The groups behind the report want manufacturers to be more transparent about where they make shoes that are on sale on UK high streets – and about wages and working conditions.

McMullen added: “Today, we are calling out brands that hide exploitation behind labels that con consumers. Brands have a duty to make sure human rights are delivered for people who make their shoes. Being honest about where that is, is one of the first steps.”

Separately, one company not named in the report, Adidas, was invited by the researchers to comment on its findings and backed the campaigners’ calls for improved working conditions. “We do agree … that working conditions in eastern Europe are generally under-reported and increased worker rights protection is called for. More should be done to improve wages and we know, first-hand, that engagement between local suppliers, unions, governments, and buyers can pay dividends and improve the overall lives of workers,” it said.

Zara’s parent company, Inditex, confirmed that it produced a small number of shoes in Romania and Albania. It said it operated a strict code of conduct to comply with the most stringent labour and human rights standards. It added: “In line with a key recommendation of the report, Inditex is working hard, worldwide, to drive living wages throughout its supply chain.”

Lowa stressed that it too set the highest ethical standards. In a statement, it said: “Lowa strongly condemns the deplorable conditions shown in these reports. The decision to manufacture 100% ‘made in Europe’ incorporates our assurance of fair and humane manufacturing conditions. We will be intensifying our oversights in this area in order to be absolutely certain that facilities producing for Lowa abide by such conditions.”

The other brands did not respond to the allegations in the report or to the Observer’s request for comment.