The domestically focused FTSE 250, considered a barometer for Brexit sentiment, dropped about 0.9%, but finished the last full week of the year up 2.5%.

Autos, real estate and banking stocks posted some of the steepest percentage losses.

The European Union said there were just hours left to strike a trade deal, while Britain called on the bloc to see sense as the two sides race to prevent a turbulent finale to the Brexit crisis at the end of the month.

"Both U.S. stimulus talks and UK/EU trade talks move into the final straits, with both threatening to stretch into the weekend and perhaps beyond, pushing the deadlines, as well as the patience of the markets, to the limit," said Michael Hewson, chief market analyst at CMC Markets UK.

Uncertainty over a post-Brexit deal pushed the exporter-heavy FTSE 100 down 0.3% as U.S. stocks dipped on a cooling fiscal stimulus-led rally. [GBP/]

The UK stock market has tracked a global rally this year following the coronavirus-led crash in March, but both the FTSE 250 and FTSE 100 have lagged their European and U.S. counterparts on fears of a long road to pre-pandemic levels of UK economic growth.

Data on Friday showed UK retail sales fell 3.8% on the month in November, when a four-week lockdown in England closed stores selling non-essential goods.

In company news, Frankie and Benny's owner The Restaurant Group shed about 6% after it warned of a tough first quarter.

Fashion retailer Next dropped 2% as a report said it was in talks with U.S. investment firm Davidson Kempner Capital Management for a joint bid to gain control of Arcadia fashion group, which collapsed into administration last month.

(Reporting by Medha Singh and Shivani Kumaresan in Bengaluru; Editing by Saumyadeb Chakrabarty and Mark Potter)

By Medha Singh