By Charlotte Beugge

The manager of Britain's two largest investment funds, Neil Woodford, has warned that Europe could go into recession this year.

Woodford, who manages more than £19 billion of investors' money in two main funds, Invesco Perpetual High Income and Income, has also warned that UK economic growth could disappoint this year.

In an interview with specialist magazine Investment Week, Woodford warns: "The increasingly tough economic outlook is not a surprise to us and we believe the eurozone is on the verge of a renewed recession and there are downside risks to forecasts of UK economic growth.

"We maintain our view the developed world faces a prolonged period of low economic growth."

He adds that he is disappointed in some of the Christmas trading figures announced by retailers so far this year.

The report says that the Income fund had been one of the largest investors in Tesco, which announced poor figures for the Christmas period, but Woodford has been selling down the stake and it is not in the top ten holdings of the fund.

It adds that in December, Woodford warned that Tesco could be vulnerable to any slowdown in consumer spending but said it was showing good overseas growth. Over the last month, he has boosted his stake in Swiss pharmaceutical giant Roche and more than 5% of the High Income fund is in the stock.

Woodford looks for stocks which are non-cyclical - that is, their profits won't be overly affected by economic ups and downs. Drugs companies are largely non-cyclical stocks - because whatever the economic climate, people get ill.

In the five years to 5 January, Invesco Perpetual High Income was up 14.43% - double the return of the FTSE All Share Index.