The internationally focused FTSE 100 fell 3.3%, while the FTSE Mid 250 index, comprising companies more exposed to the British economy, posted deeper losses of 4.6%.

Shares in Royal Dutch Shell and BP fell over 6% each as oil prices dived on concerns about oversupply concerns and forecasts of global demand crumbling to its worst levels in a quarter of a century.

"Going forward, sustained oil prices at these levels signal a risk, with the energy industry being massively disrupted, as we saw back in 2015," said Brad McMillan, chief investment officer for Commonwealth Financial Network.

Further, weak U.S. data worsened the mood after the International Monetary Fund warned the global economy may mark its steepest downturn since the Great Depression of the 1930s.

With the death toll in Britain rising past 12,000 and tight lockdown measures in place, economists predict the domestic economy could shrink by 13% this year.

"A lot of the domestic weakness is around concerns over the UK economy being locked down for longer," said Roger Jones, head of equities at London & Capital.

"The UK previously looked like one of the first countries to come out of the lockdown situation in Europe, and they now look to be potentially one of the last countries."

Despite aggressive monetary and fiscal stimulus measures helping midcap shares recover about 24% from their March lows, they are still nearly 31% below all-time highs.

Shares in cinema operator Cineworld slumped 21% to the bottom of the midcap index, while insurer Hiscox dropped 13.3% after brokerage Peel Hunt cut its price target on the stock.

Asset managers came under pressure after Jupiter Fund Management reported a drop of 18.3% in assets under management in the first quarter as fears over the pandemic rattled financial markets. Smaller rival Merian Global Investors was the worse hit.

Jupiter's shares tumbled 8.6%, while Ashmore Group, Schroders and Standard Life Aberdeen dropped between 6% and 8%.

Shares in Kromek, a global supplier of medical devices, jumped 9.4% after announcing plans to start manufacturing medical ventilators in Britain and globally under a licence from Japan's Metran.

(Reporting by Devik Jain and Sruthi Shankar in Bengaluru; Editing by Patrick Graham, Uttaresh.V and Pravin Char)

By Devik Jain and Sruthi Shankar