Miliband’s policy is intended to address the rising costs of energy, which many consumers put down to energy company greed.
However, Woodford (pictured) says that prices are rising because of environment regulations brought in by previous governments.
Shares in the sector have fallen sharply today, and the manager says the policy would make it almost impossible for the companies to invest further in the UK. “[This policy] is economic vandalism at a time when this country needs all the help it can get,” Woodford said, according to media reports.
“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.”
“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,” Woodford added.
Woodford says that the UK energy sector is crying out for investment to maintain supply, but the stated policy of the Labour Party, leading national polls around 18 months away from the next general election, will increase uncertainty.
“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.”
Woodford is head of equities at Invesco Perpetual, which holds 4.97 per cent of Centrica shares. The manager holds both Centrica and SSE in his funds.
Centrica warned in response to the policy announcement that it could go bust if it was implemented, and its share have lost 4.52 per cent of their value today at the time of writing.
From the point of view of shareholders in the company, Woodford says that the policy is bad news for its UK business.
“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
“[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.”
Only yesterday Job Curtis, manager of the City of London IT told FE Trustnet that the utilities such as Centrica offered reliable earnings streams and dependable dividends for UK equity income investors, but Miliband’s proposal has overnight massively increased the risks of investing in the sector.
A huge number of investors have exposure to the companies which are popular holdings for UK equity income managers.
Data from FE Analytics shows that Centrica is a top 10 holding of 64 funds in the IMA universe.
Premier Global Water and Power has the largest position as a proportion of the fund at 5.02 per cent.
Aberdeen UK Equity Income has 5 per cent in the stock and Rathbone Blue Chip Income and Growth 4.82 per cent.
Funds with biggest holdings in Centrica
| Fund | % in Centrica | |
|---|---|---|
| Premier - Global Power and Water | 5.02 | |
| Aberdeen - UK Equity Income | 5 | |
| Rathbone - Blue Chip Income & Growth | 4.82 | |
| Aberdeen - Responsible UK Equity | 4.5 | |
| Newton - UK Opportunities | 4.25 | |
| HSBC - Income | 4.22 | |
| HSBC - UK Growth & Income | 4.19 | |
| HSBC - UK Freestyle | 4.18 | |
| HSBC - Common Fund for Growth | 4.17 | |
| SJP - UK High Income | 4 | |
| Aberdeen - Ethical World | 4 |
Source: FE Analytics
Artemis Income, Premier Monthly Income, Newton Higher Income and Threadneedle UK Extended Alpha are other notable funds to hold the stock in their top 10.
SSE has fallen 5.22 per cent today at the time of writing. There are 27 IMA funds that hold it in their top 10. Newton Higher Income has a further 3.1 per cent in SSE, making this week a poor one for them.
Funds with biggest holdings in SSE
| Fund | % in SSE | |
| Consistent UT | 4.88 | |
| First State - Global Listed Infrastructure | 4.5 | |
| Newton - UK Opportunities | 3.87 | |
| L&G - UK Equity Income | 3.49 | |
| Rathbone - Income | 3.46 | |
| Baillie Gifford - Global Income - | 3.4 | |
| Scot Wid - Environmental Investor | 3.3 | |
| Ecclesiastical - Amity Balanced For Charities | 3.21 | |
| Newton - Higher Income | 3.19 | |
| Old Mutual - Newton Global Higher Income | 3.1 | |
| Newton - Global Higher Income | 3.1 |
Source: FE Analytics
Consistent UT is the most exposed, with 4.88 per cent in the company, while First State Global Listed Infrastructure has 4.5 per cent.
