Britain's FTSE led lower by AB Foods, utilities

* FTSE 100 down 0.3 pct; mid caps down 0.1 pct

* Utilities among biggest fallers

* AB Foods down on caution over its sugar business

* Break-up talk lifts Whitbread (Frankfurt: WHF4.F - news)

By Danilo Masoni

MILAN, Jan 18 (Reuters) - Britain's top share index fell on Thursday led lower by utilities and a decline in Associated British Foods after the food processor and retailer cautioned over its sugar business.

The FTSE was down 0.3 percent by 0938 GMT, while the mid cap index also fell by 0.1 percent.

Utilities were weaker after a junior minister told a parliamentary committee that Britain hoped to pass laws to allow the capping of the most common form of gas and electricity tariffs for millions of households by the summer.

Although the story regarding price caps are not new, some traders said that was weighing on the sector.

SSE (LSE: SSE.L - news) was the top loser on the FTSE, down 3.1 percent, as the stock traded ex dividend, while elsewhere in the sector, National Grid (LSE: NG.L - news) fell 1.1 percent, Severn Trent (Other OTC: STRNY - news) added 0.7 percent and Centrica (Frankfurt: A0DK6K - news) slipped 0.5 percent.

"The sector is struggling a bit mainly because there seems to be loads of competition partially because of search engines who supposedly help people to find the best deal," said Markus Huber, trader at City of London Markets.

Also with wholesale energy prices on the way up at the moment, there might be concerns that they won’t be able to pass these fully on to customers in the future especially with the price cap legislation hanging over them," he added.

Primark owner AB Foods dropped 4 percent.

The company maintained full-year earnings guidance on Thursday, but cautioned revenue and profit at its sugar business would fall by more than previously expected due to lower European Union sugar prices.

Another gainer was Hargreaves, up 3.7 percent, after a price target upgrade from Barclays (LSE: BARC.L - news) .

Whitbread also rose, by 2.3 percent, as prospects of a break-up of the company more than offset disappointment over a drop in sales for its Costa Coffee business in a tough British retail market.

Reuters reported late on Wednesday that investor Sachem Head was pushing the FTSE 100 company to consider splitting the Costa Coffee (NYBOT: KC-ZK15-c.NYB - news) chain from its hotels and restaurant businesses, according to two people familiar with the matter.

Among mid caps, Balfour Beatty (Other OTC: BAFBF - news) rose after the infrastructure group released financial details on the positive impact expected from tax cuts in the United States. (Reporting by Danilo Masoni; Editing by Toby Chopra)