The export-heavy FTSE 100 index closed 1.9% lower, dragged down by travel and leisure <.FTNMX5750>, pharmaceutical <.FTNMX4570> industrial <.FTNMX2720> and financial <.FTNMX8770> stocks.
The domestically-focussed mid-cap FTSE 250 index lost 0.8%, with gold miner Centamin Plc tumbling 19.2% to the bottom of index after cutting its 2020 production forecast.
New tiered restrictions in parts of England due to a resurgence in novel coronavirus cases and an impasse over a Brexit trade deal have pressured UK markets this week, with data also signalling a slowing domestic recovery.
South Yorkshire will join Liverpool and Lancashire in the highest tier with the same measures to be imposed in Manchester as talks stalled for a support package with local leaders.
"The underlying fear for the markets at the moment is that the UK probably gets to a point where you've amended restrictions in so many regions that perhaps the next step would be a national lockdown," said Connor Campbell, financial analyst at Spreadex.
The blue-chip index also underperformed as sterling soared to a six week-high on reports that Brexit talks were expected to resume again, after the United Kingdom walked away from the negotiations last week.
"There are hopes that a deal should materialise in mid-November, though it needs to be taken with a significant pinch of salt as we've been in this position countless times now." said Campbell.
Official figures meanwhile showed UK public debt jumped to its highest since 1960 in the first half of the year, while annual consumer price inflation climbed to 0.5% in September.
In company news, Metro Bank Plc rose 2.5% after the lender reported a 2% increase in lending for the third quarter.
(Reporting by Devik Jain in Bengaluru; editing by Uttaresh.V and Catherine Evans)
By Devik Jain