Britain's index of leading shares fell below the key 5,000 level on Friday for the first time since November 2009, as euro zone sovereign debt concerns weighed on sentiment, with banks and oil stocks hit hardest.
By 1121 GMT, the FTSE 100 had fallen 81.04 points, or 1.7 percent, to 4,992.09.
The index has lost more than 14 percent since fears escalated about the euro zone sovereign debt crisis in mid-April and is down 7.8 percent so far this year.
Banks, which have been hard hit by the sovereign debt crisis, continued their slide from the previous session with HSBC, Royal Bank of Scotland and Standard Chartered down 2.7 to 3.7 percent.
The sector was also struggling after the U.S. Senate, on Thursday night, approved a sweeping Wall Street reform bill for financial regulation. Changes proposed threaten to constrain the banking industry and reduce its profits for years to come.
The inability of euro zone leaders to agree on policy on the debt crisis has heightened investors' nerves this week, contributing to a 5.3 percent fall in the index since Monday.
"It is the uncertainty that makes it that much more difficult, while a long-term investor can say there are some reasonable valuations, in the short term it does not count for a huge amount," said Tim Rees, fund manager at Insight Investment.
"In the short term there is an element of uncertainty that prevents one from feeling confident that the bad news is priced in the market."
On Friday, Germany is poised to approve the lion's share of a $1 trillion safety net for financially troubled euro zone nations as an EU task force looks to toughen regulations within the bloc blighted by a debt crisis that has cast a pall over global economic health.
OILS SLIP
Energy stocks slipped back as crude fell below $70 per barrel on worries that Europe's debt crisis could hurt global economic growth and slow energy demand.
BG Group and Royal Dutch Shell slipped 1.2 percent and 1.1 percent respectively.
BP lost 3.6 percent after U.S. politicians accused the company of covering up the true extent of the oil spill in the Gulf of Mexico.
However, the mining sector held up relatively well, given a boost by a positive note from HSBC.
The broker reiterated its "overweight" position on Rio Tinto which added 0.4 percent.
Xstrata rose 1 percent after HSBC upgraded it to "neutral" from "underweight".
