United Utilities warns of struggle to keep costs low

United Utilities has warned it will struggle to keep costs down over the next two years, as a sharp rise in inflation puts pressure on it.

The water company complained on Wednesday that Ofwat, the water regulator, made no allowance for inflation when it set prices for households back in 2014.

The business, which supplies the North-West and parts of Wales, made its comments as it revealed profits up 10% to £344 million in the first six months of the year.

It also said that it spent £394 million in the first half to protect its supplies from huge flash floods and storm damage, a figure which will reach £800 million in the full year.

Steve Mogford, chief executive, hailed the strong first-half and said that customers can still expect average bills to fall over the 10 years between 2010 and 2020.

Mogford said the company was now working on preparations for the next regulatory period where affordability would remain a challenge. “Affordability will be key, balanced against resilience to climate change,” Mogford said.

United Utilities is one of the stock market’s biggest dividend payers. It raised its interim dividend by 2.2%, and shares now yield more than 5%.