Britain's FTSE steadies near record high, Next slumps

* FTSE 100 steadies at the close

* Next tanks after profit warning

* Housebuilders find support (Updates at market close)

By Helen Reid and Kit Rees

LONDON, Jan 4 (Reuters) - Britain's top share index closedslightly firmer and near a record high on Wednesday as a rallyin housebuilders was offset by a slump in retailers after Next issued a profit warning.

The bluechip FTSE 100 index closed 0.17 percenthigher at 7,189.74 points, having touched an all-time high of7,205.45 in the previous session.

Next hit a two-month low and closed 14.4 percent weakerafter the retailer cut its profit guidance for the currentfinancial year and warned on the outlook, highlighting"exceptional" levels of uncertainty in the sector.

In its Christmas trading update, Next said its centralguidance for the year to January 2017 was for pretax profit of792 million pounds ($971 million), down from the 805 millionpounds it had previously forecast. It also said it expectedprices to rise by 5 percent on the pound's plunge after Brexit.

"The fundamental issue is that you've seen a nearly 20percent trade-weighted depreciation of sterling over the last 12months," said Jeremy Lawson, chief economist at Standard LifeInvestments.

"In a sector that imports a very large proportion of theunderlying product, that significantly increases the costs inthe supply chain."

Peers Marks & Spencer and Primark owner AssociatedBritish Foods dropped 6.1 percent and 3.7 percentrespectively, while mid-cap Debenhams fell 6.6 percent.

There was a silver lining for the retail sector, however, asmid-cap B&M jumped 9.5 percent after the discount storechain said a record Christmas drove a strong third quarter.

Housebuilders were on a strong footing, with BarrattDevelopments, Taylor Wimpey and Persimmon rising between 2.8 percent and 4.1 percent, helped bymortgage approvals in November reaching an eight-month high,indicating a post-Brexit recovery.

A positive note from Deutsche Bank also helped the sector.The bank said it saw close to 30 percent upside across thehousebuilding sector as a whole. Housebuilders lost more than 20 percent in 2016.

"After a tumultuous 2016, we see appealing value in the UKhousebuilder sector. While investor appetite for UK-focusedstocks remains more moderated reflecting Brexit risk, we seedividend yield as difficult to ignore," analysts at DeutscheBank said.

Taylor Wimpey and Barratt Development have trading updateson Jan. 11 and 12 respectively. (Editing by Mark Trevelyan)