Citi expresses concern around UK water utilities' premium valuation

Analysts at Citi on Wednesday recommended investors turn off the tap, cautioning they were increasingly concerned about UK water utilities' premium valuation.

Their share prices had run up by 83% since 2010, outperforming the wider sector by 101% during that time frame, analyst Jenny Ping said in a research note sent to clients.

She downgraded her recommendation on Pennon and Severn Trent to 'sell', while leaving its stance on United Utilities - its preferred UK play in the sector - at 'neutral'.

Ping flagged the risks the sector was facing including, potential changes to tax legislation, the at least £8bn-worth of regulatory asset valuations put up for sale and unsupportive falling return spreads.