According to an Ernst & Young survey, families in UK that have not been affected by job losses have enjoyed a 25 per cent increase in spending money over the past year after mortgage costs and energy bills dropped.

The average UK household income of families that did not suffer job losses rose by £200 a month, the business consulting firm says in a report. Homeowners benefited with the Bank of England cutting the key rate to a record low level of 0.5 per cent that helped curb mortgage costs. Gasoline, gas and electricity bills also fell sharply it says.

Rising unemployment and the worst recession in a generation will likely encourage people to pay back their debt as they cut spending from their disposable wealth in the shops according to the report. Meanwhile, according to the Office for National Statistics UK retail sales for May have unexpectedly dropped for the first time in three months.

The average UK household has a higher percentage of its gross income left after paying bills as compared with last year. The £1,075 that the household has left to spend after paying bills amounts to 27 per cent of gross income as compared with 22 per cent last year.

Unemployment is at the highest since 1996 in the quarter through April and the Confederation of British Industry has predicted the up to 3 million consumers would likely be out of work by middle 2010.

With average monthly mortgage repayments down 20 per cent on last year households are saving 8 per cent in fixed monthly household costs.

Families that have continued to remain in work through the downturn have more than £200 a month more to spend the study says.

However the company's retail director Jason Gordon says that although households may have more money each month, there has been a decline in house prices over the last year leading to significantly eroded overall wealth.

He said that consumer confidence has suffered heavily with the falling house prices, bleak economic climate and fears of job losses. He said that consumers are increasingly not inclined to spend freely and are using their increased monthly spending power to repair savings balances and pay off credit cards and other debts.

However critics point to several flaws saying that there are several factors that the survey has failed to take into consideration. For example, they point out that is does not include costs of food when calculating outgoings. They add that although food price inflation has slowed down in recent months, the past year has seen the cost of food surge hugely. In fact the food price inflation in the UK is almost four times higher than in the rest of Europe they say.

Also people's debts have risen dramatically, and it was only a week back, that Citizens Advice, a service that helps people in UK resolve their legal, money and other problems said it advised 1.93 million new debt problems during the 12 months to the end of March. The number of people wanting help on debt problems has grown 21 per cent the charity said.