WATER firm United Utilities has revealed a £25m dent in profits after it had to pay out compensation to hundreds of thousands of customers affected by the discovery of a parasitic bug in supplies.

The company started sending out cheques for compensation payments ranging from £50 to £60 earlier this month to 300,000 households in Lancashire - representing ten per cent of its customers.

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In a trading update, UU said that operating profit in the first half of its financial year ending on September 30 would be affected by customer compensation and one-off costs totalling around £25million relating to the incidents.

Residents in Chorley, Blackpool, Preston, South Ribble and Fylde were restricted for around four weeks in some cases.

The microscopic bug, which can cause sickness and diarrhoea, had also initially been thought to be affecting parts of Blackburn and Darwen but that alert was ended within a couple of days.

Villages such as Mellor Brook, Abbey Village, Withnell, Wheelton, Hoghton and Brinscall were all affected.

Analysts have said the group will also face regulatory performance penalties in addition to these costs - though there was no mention of these in the latest statement.

These are expected to be in the low single-digit millions.

United Utilities said: “We were very disappointed that a significant water quality incident occurred this summer in parts of the Lancashire region, and we are continuing to investigate the cause.”

Homes and businesses in parts of the county were first warned to boil their water before use on August 6.

The company said: “We recognise the inconvenience this placed on many of our customers and are very grateful for their patience and understanding. We are in the process of paying compensation.”

The group said in its latest update that reported operating profit for the first half would be hit by the ‘water quality incident’ as well as restructuring costs of around £5 million.