Britain's top shares shouldered steep losses by midday on Tuesday with investor sentiment hit by euro zone debt contagion fears and rising tensions in Korea, which knocked demand for commodity and banking stocks.
By 1124 GMT, the FTSE 100 was down 143.88 points or 2.8 percent at 4,925.73, having touched an eight-and-a-half month low at 4,898.49.
British blue chips have fallen over 15 percent since fears escalated about the euro zone sovereign debt crisis in mid-April, with benchmark UK stock valuations at their lowest level in 10 months at 11.43 times reported earnings.
UK banks fell across the board as jittery investors feared southern Europe's sovereign debt problems could derail the global economic recovery.
Royal Bank of Scotland, Barclays and Royal Bank of Scotland shed 5.8 to 9.3 percent.
Sector confidence took a knock as investors pondered how deep the debt issue runs after Spain's central bank bailed out regional bank CajaSur on Saturday.
MARKET CAUTION
Increased tensions between North and South Korea also heightened market caution. North Korean leader Kim Jong-il has ordered his military to be on a combat footing..
Miners suffered as metal prices retreated on demand concerns, with ENRC, Rio Tinto, Xstrata and Lonmin down as much as 6.9 percent.
"I think it is more a buyers strike rather than a huge amount of seller pressure," Rupert Armitage, director at Shore Capital, said. "I don't think we're going low … We have just had GDP revised upwards and there are some very strong companies out there."
Britain's economy grew slightly faster than initially estimated in the first three months of this year after a rebound in manufacturing and business services.
Water firm Severn Trent was the sole FTSE 100 riser, up 0.3 percent, after mid cap peer Pennon beat expectations with a 14 percent rise in full-year profit.
Pennon was the top FTSE 250 riser, up 3.9 percent.
Oil major BP, down 2.2 percent, was dogged by worries over its liability to a major oil spill in the Gulf of Mexico.
The company said it is exploring a new way to siphon off oil gushing into the Gulf if current plans to plug the leak this week fail.
Prudential dropped 3.4 percent after its shares fell on their Asian debut, hit by the global sell-off and concerns over shareholder support for the British insurer's planned purchase of AIG's Asian operations.
Chipmaker ARM Holdings fell 5.7 percent as JPMorgan Cazenove downgraded the stock to "underweight" in a cautious note on the sector.
Marks & Spencer, Britain's biggest clothing retailer, was down 2.1 percent after it said it was cautious about the outlook for consumers ahead of expected tax rises.
