Rises in the cost of living means UK consumer spending power is now 15% lower than it was five years ago, according to research Ernst & Young.

The study found that the typical family had less than 20% of its income remaining after bills and tax, compared with 28% in 2003, suggesting businesses selling non-essential items can expect some tough times ahead.

"Many UK consumer segments are clearly feeling the pinch as big rises in household costs are far outstripping relatively modest wage inflation," said Jason Gordon, director of retail at Ernst & Young.

"The significant decline in discretionary income means consumers are no longer in a position to spend as freely as they have done in the past."

Ernst & Young added that the situation was only likely to get worse, with fuel and interest rates likely to rise in the coming months.