AS the nightmare oil spill in the gulf of Mexico continues, the potential costs for BP mount. The company has taken over from the banks as the favoured target of American politicians. Robert Reich, Bill Clinton's secretary of labour, has called for the company's US operations to be put into receivership; credit default swaps trade as if the company's bonds are junk.

Today the shares fell 13% in London. That has a big impact on the FTSE 100, since BP is 7% of market cap. But the oil company has an even bigger impact for income-seeking investors. After the big banks slashed their payouts, the market has become more dependent on BP and Shell. According to Andrew Lapthorne of Societe Generale, BP represents around 12% of the entire UK dividend. The current consensus forecast is for a 4% decline in the dividend and that would be more than compensated by the US dollar's rise against sterling (BP pays dividends in dollars). But BP will surely come under pressure to slash its payout by more than that, if only to appease those demanding that the company compensate everyone from shrimp fishermen to owners of beachfront properties. That would undermine the yield support for the UK market.