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United Utilities gets a lift as dividend cut reassures

United Utilities shares surged four per cent to top the FTSE 100 risers yesterday.

The rise of 21p to 529.5p came after the water firm vowed to cut dividends in the next financial year by just 12.5 per cent. Analysts had predicted a cut of over 20 per cent.

The UK’s largest water firm will pay out a total dividend of 34.3p per share for this financial year. The sum will be cut to 30p per share for the next 12 months because of tougher restrictions on returns introduced by industry regulator Ofwat.

The regulator last year restricted the return British water companies can make on their capital to 4.5 per cent until 2015. United Utilities will also have to meet a cut of 0.4 per cent on bills next year and invest £3.6bn in infrastructure over the next five years, an increase of £400m in real terms compared with 2005 to 2010.

It had considered taking the matter to the Competition Commission.