Firstly, your friends that suggest using a proxy is a security risk are a bit misguided. Proxies have a legitimate purpose, and ISPs very very often use them. As Matt says, with NTL, even if you don't specify a proxy yourself, your internet traffic will automagically be routed to use one transparently. For your own piece of mind, it's possible to determine who owns a proxy by looking up who the IP address is registered to. That would confirm whether the customer advisor was being a bit liberal with the truth
It's possible to use other proxies, not just ones owned by your ISP (as you're doing currently by using a German one). There are other UK based ones which would probably give you a better response time. Before the German one goes belly-up, browse Google for a list of UK-based proxy servers, so you can switch to one of these if you suddenly find the German one not working.
Finally, did the customer advisor ask you to quantify the performance issue? Did they ask you to try pinging some servers, and note the response. In fact, can you do that and paste the response below? Just open a command prompt, and type
ping www.yahoo.com - I wouldn't bother pinging any Microsoft sites, as they've disabled the ICMP responses... er, which means basically it won't work
Paste the output here for us to see.
Once you've done that, you can also try monitoring the exact route that your network traffic is taking to a particular website by using the tracert command. Back in the command prompt, type
tracert www.yahoo.com and paste the results in here (delete your own IP address from the results for secrutiy reasons).
That will show us where any bottleneck is between yourself and the website.