Energy stocks weigh on Britain's FTSE as May attacks "rip-off" prices

By Helen Reid and Kit Rees

LONDON (Reuters) - Energy providers Centrica and SSE dragged on Britain's main share index on Wednesday after Prime Minister Theresa May announced plans to cap energy prices.

The FTSE 100 (.FTSE) closed flat at 7,467.58 points after British Gas owner Centrica (CNA.L) sank more than 6 percent, closely followed by a 3.2 percent fall in SSE (SSE.L).

Both energy providers had been falling earlier in the session as traders anticipated an energy policy announcement. May's criticism of "rip-off" energy prices pushed Centrica towards a 14-year low.

"Any move to cap prices would be a massive hit to the industry," Neil Wilson, senior market analyst at ETX Capital, said.

"It might cost Centrica something like 200 million pounds($265.42 million) and make it much tougher for the firm to reintroduce the progressive dividend policy," he said.

May's pledge of 2 billion pounds towards affordable housing failed to move housebuilders' stocks, which had already rallied strongly in the past week after she unveiled an extra cash injection into a scheme to help first-time homebuyers.

"The housebuilders did very well when the prime minister announced additional funding for 'Help to Buy', because that's a key tailwind the housebuilders have enjoyed and will continue to enjoy for some time," Laith Khalaf, market analyst at Hargreaves Lansdown, said.

The money pledged on Wednesday would be aimed at local councils and housing associations rather than directly incentivising housebuilders.

Food retailers were also among top fallers, with Tesco (TSCO.L) down 3.2 percent and closely followed by Sainsbury (SBRY.L) and Morrisons (MRW.L).

Tesco, Britain's biggest retailer, said it would resume paying a dividend for the first time in three years and also announced a 27 percent rise in first-half profits.

Tesco's shares had risen sharply in the previous session as investors anticipated a return to payouts, and its strong beat over earnings expectations had been anticipated, Berenberg consumer goods analysts said.

"Whilst the dividend was reinstated, again this was expected and came in lower than expected at 1p (our risk arbitrage team was expecting 1.36p)," they said.

A rise in sterling also put pressure on the index, with the currency buoyed by robust services sector data. A stronger pound is a drag for the FTSE's largely dollar-earning constituents.

Royal Dutch Shell (RDSa.L) and BP (BP.L) dipped, in line with a Europe-wide drop in energy stocks, and on doubts that a recent rally in oil prices would last through the last three months of the year. [O/R]

Standard Life Aberdeen (SLA.L) shares fell 2.1 percent after the asset manager said it planned a subordinated debt issue.

($1 = 0.7535 pounds)

(Reporting by Helen Reid and Kit Rees. Editing by Jane Merriman)