I have just spent a month in Tenerife, and have been able to examine my statements and so on.
THE best place to buy Euros is Marks and Spencer.
If you have a Nationwide or post office debit card you will not be charged any loading - just the exchange rate of the day. Same with Nationwide credit cards for purchases. Nationwide does not charge for using ATMs abroad, unlike most other companies.
Good independent information here:
http://tinyurl.com/cklcl
For me, I found it best to take enough cash for day to day spending but use the Nationwide credit or debit cards wherever they were accepted.