Top Centrica shareholder Neil Woodford accuses Labour leader Ed Miliband of ‘economic vandalism’

Neil Woodford, the head of equities at Invesco Perpetual and one of the UK’s most influential fund managers, said that Labour plans for a price cap on energy bills would damage the investment case for the UK and block the billions of pounds of new money the Government admits it needs.

“Here we have a serious politician, standing up and saying what he said which I think at a stroke torpedoed any chance that any of that investment will happen between now and the next election,” Mr Woodford said.

“If Centrica and SSE cannot make any money supplying electricity to the retail market then they won’t supply it. The lights will go off, the economy will shut down.

“[This policy] is economic vandalism at a time when this country needs all the help it can get. It is insane, not least it is also fundamentally dishonest to suggest to the electorate that electricity and gas prices are where they are because of profiteering by the companies.

“The margins have stayed the same, the return on capital has stayed the same. There have been umpteen investigations into the retail energy market by Ofgem over the last 10 years. But at no stage did any investigation highlight cartel activity or price fixing activity. There is no evidence of profiteering.”

Invesco is the largest investor in Centrica with a 5pc holding, worth nearly £1bn at today’s prices. It is also a top 20 investor in SSE, reports The Telegraph.

Centrica’s share price fell 4pc this morning, although some of that is down to the shares becoming ex-dividend which accounts for about a third of a fall.
SSE’s share price fell a similar amount.

“What we have had in the last 10 years – not least when Ed Miliband was energy secretary – is any number of policies that have been specifically designed to raise prices such as the carbon price floor or massive renewable policies,” Mr Woodford said.

He said it was “rank dishonesty” to blame increases in the price of bills on the energy companies and argued that the threat of a price cap had come just when the regulatory clouds “were clearing” and foreign funds were looking to make key investments in the UK’s crumbling energy supply market.

“It is so damaging for an industry where we have the potential to attract inward investment from sovereign wealth, from China, from Russia and from France,” he said.
“At a stroke all of those potential investors have had to adjust their risk discount.”
Mr Woodford argued that without investment, the UK’s reserve margin – spare energy supply capacity – would fall further.

“Reserve margin is coming down significantly,” he said. “It is highly likely that we will run out of reserve margin in two years’ time, just when Mr Miliband expects to bring in this policy. Nothing to could be designed to be more damaging to the economy.”
He said that Centrica should consider halting investment in the UK.

“[We would] encourage them when thinking about investment to significantly downgrade the attractiveness of the UK and significantly upgrade the attractiveness of investing elsewhere or returning cash to shareholders,” he said.