The FTSE 100 fell 0.4 percent and the domestically-focussed FTSE 250 shed 1.1 percent to hit its lowest since Feb. 12.
Last week's cautious remarks from the U.S. Federal Reserve and weak manufacturing data from Germany and the United States once again raised concerns about the world economy, making stocks, generally considered riskier assets, less appealing.
Prime Minister Theresa May battled to keep control of Britain's exit from the European Union on Monday as some in her party called on her to quit and parliament plotted to wrest the Brexit process away from her government.
Nearly three years since the 2016 EU membership referendum, it is still unclear how, when or if Brexit will take place.
CityIndex analyst Ken Odeluga said Monday's sell-off suggested a deliberate strategy among large investors to reduce British mid-cap stocks.
"The motivation for such a strategy is that it would be remiss for any investor to overlook the worsening near-term prospects with regard to high-sterling revenue earners given that Brexit scenarios remain in active, live flux," Odeluga said.
Stocks fell across the board. Sterling gained on reports of a possible third vote to try and get May's twice-defeated Brexit deal through, and along with a weaker dollar, dragged down internationally exposed components. [O/R]
However, losses on the main bourse were somewhat contained as a survey showed German business morale improved unexpectedly in March and after former U.S. Fed chair Janet Yellen said the U.S. Treasury yield curve may signal the need to cut interest rates at some point, but it does not signal a recession.
Fresnillo outperformed the FTSE 100 with a 2 percent gain as safe-haven assets such as gold were in demand.
Stocks on the mid-cap index were also pummelled, but Inmarsat jumped 9.6 percent to its highest since early September, after a private equity-led consortium agreed to buy the satellite operator for about $3.4 billion.
Oilfield and engineering services provider Wood Group skidded 7.6 percent after Jefferies cut its rating and flagged upcoming dividend risk.
"Company-specific news may drive immediate selling decisions, but the over-arching environment for politically-sensitive assets has a deepening negative bias. That's partly because objective no-deal risk persists, and paradoxically, it may even have increased," Odeluga said.
(Reporting by Shashwat Awasthi and Pushkala Aripaka in Bengaluru; editing by Larry King and Andrew Heavens)
By Shashwat Awasthi and Pushkala Aripaka