After slumping as much as 1.8% during the afternoon trade, the blue-chip index closed 1% lower, with growth-sensitive mining, energy and bank stocks leading the decline.

The domestically focussed mid-cap FTSE 250 index ended 0.8% lower as official data showed the British economy shrank by 2.6% in November, its first monthly fall since the first COVID-19 lockdown in April, as new movement restrictions were imposed, but the drop was much lower than the average forecast.

"It (the data) is better than expected, but what is worrying for the market is that contraction in November was during the far more open second lockdown," said Connor Campbell, a financial analyst at SpreadEx.

"And now the concern is, what is the figure going to be like for January and first half of February under these far harsher restrictions."

The UK economy will take more than two years to recover to its pre-pandemic level, a Reuters poll found, with more than 70 economists saying it would contract 1.4% this quarter.

After rallying more than 6% on optimism around Brexit and the vaccine roll-out last week, the FTSE 100 fell 2% this week on concerns that harsher restrictions due to surging infections might derail prospects of a swift rebound from the pandemic-driven recession.

Among individual stocks, Aveva Group jumped 7% after the industrial software provider reported an over 26% jump in third-quarter organic revenue, aided by strong and early contract renewals.

Indivior gained 9.8% after raising its annual revenue forecast.

Oilfield services provider Petrofac tumbled 27.5% after Britain's Serious Fraud Office said a former senior executive of the company pleaded guilty to three bribery offences in relation to oil deals in the United Arab Emirates.

(Reporting by Shashank Nayar and Devik Jain in Bengaluru; Editing by Subhranshu Sahu and Shounak Dasgupta)

By Devik Jain and Shashank Nayar