London's FTSE 100 closed 0.03 percent higher after hitting near session lows with sterling gaining ground following May's comments that she would seek further concessions from the EU on a back-up plan to avoid a hard border in Ireland. The mid-cap index <.FTMC> ended the day flat.

Trading on Monday was muted as U.S. markets remained closed for Martin Luther King day and volumes in both British indexes were a little over half the 90-day average daily turnover.

UK shares outperformed European peers, where data showing the Chinese economy slowed at the end of last year weighed on sentiment.

Sterling hit session highs against the U.S. dollar after May promised to be more open with parliament in negotiating the country's future relationship with the European Union.

Industrial shares <.FTNMX2750> added 1.8 percent and hit their highest since early December, while an index of housebuilders <.FTNMX3720> erased session losses to close flat after May's reassurances on Brexit. Melrose jumped 2 percent to the top of FTSE 100.

"EN ROUTE FOR ACCIDENTAL NO-DEAL"

"Just because you may not want a no-deal doesn’t mean you will avoid a no-deal. I think we are en route for an accidental no-deal. But the markets don’t seem to be pricing that in," CMC Markets analyst David Madden said, pointing to a stronger pound.

With roughly two months to go before Britain is due to leave the EU, May said she could not take a no-deal Brexit off the table as there was not yet an alternative, and the EU would not be unlikely to extend Article 50 without a plan to secure parliament's approval.

But May and other European Union leaders have a shared determination for Britain to leave the bloc with an agreement, her spokesman said on Monday.

On the corporate news front, London Stock Exchange shares climbed 1.2 percent after a report that the company is interested in bidding for Norway's Oslo Bors.

Kingfisher was the biggest blue-chip faller with a 4 percent drop after RBC cut its rating on the DIY retailer to "underperform", noting that the macro and housing backdrop remains unsupportive in the UK and France.

Miners <.FTNMX1770> were also weighing on the main index as a slowdown in the world's top metals consumer, China, stoked fears over demand and hurt copper prices.

The Brexit update overshadowed a slew of corporate news from midcaps.

Shopping mall operator Hammerson fell 3.4 percent, top drag on FTSE 250, after JP Morgan cut its rating to "Neutral".

William Hill fell nearly 2 percent after the bookmaker said it would remodel its retail business after warning that full-year profit will fall 15 percent.

Takeaway ordering website Just Eat ended a choppy session with a 0.7 percent gain after saying its chief executive Peter Plumb was stepping down after just 16 months at the helm.

(Reporting by Muvija M and Arathy S Nair in Bengaluru, Editing by Helen Reid and Ed Osmond)

By Muvija M and Arathy S Nair