Phillips who signed from Birmingham's rivals West Brom turned nicely away from Chris Morgan to slot past Kenny on 93 minutes in wet and slippery conditions.
Despite being signed for around the region of £2m, David Cotterill was left on the bench. McFadden ran into the area with Sun Jihai and dramatically went down to try to win a penalty but the referee waved away.
Two Blades corners didn't trouble Birmingham but United did gain another. Tonge crossed it in, the ball was cleared out to Gary Speed who could volley the ball directing into the top half of the net and was tipped over well by Taylor.
Quinn smashed his shot wide while Henderson and Sharp had their opportunities straight at the keeper. McFadden whipped his ball into the back post which nearly met the rising Marcus Bent but he couldn't latch onto the dipping ball.
A debatable free-kick was awarded to Birmingham 25 yards out but Larsson curled his effort well over. United continued to put pressure on the Midland outfit but the deadlock was still not broken.
A late challenge on Stephen Quinn just before the half-time period occurred some arguements and trouble while Parnaby picked up a yellow card with his late tackle.
The ball was played forward to Billy Sharp and he won a corner off of Ridgewell. That was Sharp's last involvement in the encounter when he got substituted for the in form pre-season goal scorer Danny Webber.
With 15 minutes remaining, O'Connor laid off James McFadden who had a real opportunity to take the lead but he blazed his shot over the crossbar. United won a free-kick after Stephen Quinn got fouled just outside the Birmingham area.
Tonge tapped the ball to Speed who consequently smashed the ball into the Blues wall. Henderson then somehow scrambled into the area on the bar line and wasted his chance which could have proved to have been a goal.
Henderson was swapped for Stead with several minutes left on the clock. He picked up a booking straight away after a tussle with Murphy then Naysmith did an immense tackle to stop McFadden capitalising.
Sun Jihai conceded a free-kick in the first minute of the three added on, Birmingham came close with Murphy directing his header wide of the post.
With St. Andrews emptying by the minute, the Blades were shocked when Birmingham snatched a winner. O'Connor's header met the turning Kevin Phillips who could slot the ball past Kenny's fingertips into the bottom corner.
The season started with a loss but some take credit from their performances. On the other hand many didn't perform and may need to take a look in the mirror.