After slumping as much as 2.5% during the session, the blue-chip index closed down 1.7% to mark its biggest daily decline since late September, with energy <.FTNMX0530>, insurance <.FTNMX8570> and mining <.FTNMX1770> stocks leading declines.
The mid-cap FTSE 250 fell 0.6% with London set to enter a tighter COVID-19 lockdown from midnight on Friday as Prime Minister Boris Johnson seeks to tackle a swiftly accelerating second coronavirus wave.
"The issue is what it will actually do to the economy, and the fact that the UK is sort of backtracking on the progress that's been made is not a good sign for the economic recovery," said Greg Swenson, founding partner of Brigg Macadam, a London-based investment bank.
After tracking gains in global equities for two straight weeks on hopes of more U.S. stimulus, UK stocks have also come under pressure this week as a Brexit trade deal remains elusive.
European Union leaders agreed to extend Brexit trade talks for few weeks on Thursday, but also called for no-deal preparations should the troubled negotiations fail.
"Markets don't like uncertainty and the fact that a no deal Brexit is looking like a possibility here is not good," Swenson said.
Pub operator Marston's Plc shed 1.4% as it announced job cuts due to the tiered-restrictions.
In company news, recruitment agency Hays Plc fell 1.3% after posting a 29% drop in its first-quarter net fees due to the coronavirus crisis.
Business supplies distributor Bunzl Plc and Britain's biggest retailer Tesco Plc lost 2.4% and 3% in ex-dividend trading.
However, AO World Plc surged 30.7% after the online electricals retailer said it expect a 57% increase in first-half revenue on strong consumer demand during the COVID-19 pandemic.
(Reporting by Devik Jain in Bengaluru; Editing by Uttaresh.V, Arun Koyyur and Toby Chopra)
By Devik Jain