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Centrica, SSE pull out of slump as Britain's FTSE edges higher

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* FTSE 100 up 0.2 pct

* Energy providers Centrica, SSE, recover from slump

* Mediclinic rises after GS ups to "neutral"

* FTSE to flat-line into year-end - Reuters poll

LONDON, Oct 5 (Reuters) - Britain's main share index outperformed European peers on Thursday as a weaker pound and strong basic resources stocks underpinned gains, and Centrica and SSE recovered from a slump after Prime Minister Theresa May announced a cap on energy prices.

Sterling dropped half a percent against the dollar in early deals, helping support the internationally-focused FTSE up 0.2 percent against slightly weaker European benchmarks.

Britain's biggest energy provider Centrica and peer SSE both recovered from sharp losses in the previous session after May announced a cap on energy prices in her speech to party activists.

SSE was up 2 percent and British Gas owner Centrica gained 1.2 percent, rising from the near 14-year lows hit on Wednesday. Centrica's CEO urged the government to rethink its plan to put caps on energy prices.

Tesco shares also recovered from Wednesday's losses, up 2 percent and boosted by UBS raising its price target on the stock.

South African private healthcare firm Mediclinic rose 1.7 percent after Goldman Sachs raised it to "neutral", arguing the shares' recent decline took them to a level which better reflected a challenging economic environment in South Africa.

In other company movers, Merlin shares were up 1.4 percent in early deals, after a source said the Madame Tussauds owner submitted an offer for parts of Seaworld.

"Historically the group has demonstrated good discipline around M&A," said analysts at Barclays, adding too little was known about any potential transaction to judge it at the moment.

Miners Glencore, Rio Tinto, Anglo American , and Antofagasta were the biggest contributors to index gains, up 1.3 to 1.6 percent as metals prices held near multi-year highs.

Shares in small-cap DFS fell 4.2 percent after the furniture retailer reported a 13 percent fall in full-year core profits, blaming a "very challenging" UK market.

"While market conditions are currently challenging, we believe DFS is in a strong position to gain market share against a tough backdrop," said Berenberg consumer discretionaries analyst Victoria Maigrot.

Overall investors saw the FTSE hardly budging in the last quarter of the year as concerns over Brexit negotiations and a softening in earnings expectations keep the benchmark from gaining further ground, a Reuters poll found.

"The economic backdrop for the UK continues to look concerning with negative real wage growth, low household savings, high consumer debt and falling consumer confidence," said Edward Park, investment director at Brooks Macdonald.

However, he added: "The fact the market is positioned for a tough domestic backdrop stops us from becoming outright bearish as a lot of the potential risk is priced in."

(Reporting by Helen Reid; Editing by Toby Chopra)