Fears of a European Union-sponsored crackdown on sprawling energy conglomerates dragged utility and energy groups lower, as weaker oil prices weighed on large-cap stocks.

Neelie Kroes, the European Competition Commissioner, is set to report next week on the Commission’s inquiry into the energy industry. It is thought that the Commission has unearthed examples of collusion and market failure, raising concerns that big energy groups could be forced to divest assets to appease regulators.

The report is expected to call for a break-up of integrated energy companies, where the supply of energy and the distribution networks are managed by the same company.

RWE and E.ON, of Germany, and GdF, of France, are thought to be among the companies most at threat from any action. British companies came in for selling on fears that any change in the industry set-up could lessen interest in industry consolidation.

Scottish & Southern Energy and Centrica, both regularly touted as prime takeover targets, were among the heaviest fallers. SSE lost 54p to £14.91 while Centrica ended 11p lower at 350¼p.

United Utilities fell 15½p to 764½p and Kelda, the Yorkshire Water group, lost 24p at 917½p. International Power slid 17¾p to 357p and National Grid was 17p weaker at 720p.

The FTSE 100 remained in the red, closing down 66.9 points at 6,220.1. Continued weakness in oil prices was to blame, dealers said.

Oil prices have been falling since the new year, after US figures showed rising inventories amid unusually mild weather in the country. Brent crude was trading in London at just under $55, raising the prospect of a longer-term downward shift in oil prices and hopes that companies would be able to hedge their requirements at lower cost.

British Airways was one of the beneficiaries of such sentiment, adding 4p to 548¾p.

Royal Dutch Shell was an obvious casualty, losing 49p to £17.32. BP dipped 5½p to 557p.

Reed Elsevier was the talk of dealing rooms, amid speculation that private equity groups could be eyeing an approach. The media group, which suffered a shares slump in November, is cash-generative and would allow any financial buyer to leverage the balance sheet relatively easily.

The speculation remained vague, with some traders talking of Wolters Kluwer, its Dutch rival, as a possible buyer. Analysts said that such a combination was unlikely. Reed Elsevier shares ended the session up 11p at 578p.

Retailers remained in favour, with Next in demand on the back of its Thursday trading update, when the clothing retailer told investors that it would beat forecasts for the year on the back of tight cost controls. The shares topped the large-cap risers, gaining 84p to £19.40.

Tesco put on 5p to 421¾p after UBS reiterated its “buy” stance before the supermarket group’s update on Christmas trading. Analysts at the Swiss bank said that Britain’s largest supermarket chain should deliver a “relatively strong” performance for the period, helped by limited promotional activity. Tesco updates investors on trading on January 16. Wm Morrison, which delivers its Christmas update on Wednesday, was 3¼p higher at 272½p.

Cairn Energy showed further losses The shares have fallen by 19 per cent since December 5, according to Credit Suisse, largely because of fears over the IPO of Cairn India and more recently the weaker oil price. The shares ended 45p weaker at £16.70 despite analysts at the broker arguing that potential bad news is reflected in the price and the shares look good value.

British Land fell 29p to £16.52 as Merrill Lynch highlighted the temptation for property investors to lock in profits after the transition to real estate investment trusts by many large-cap property groups.

• New York: US stocks ended sharply lower as the likelihood of an interest rate cut by the Federal Reserve dwindled in the wake of a government job report which revealed a huge jump in wages. The Dow Jones industrial average closed down 82.70 points to 12,398.00.

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