Mid-cap firms, meanwhile, suffered their worst day in five months after the pound weakened more than half a percent against the dollar . The currency headed for its biggest loss in 11 days on news of a rebellion among Conservative MPs against the leadership of Prime Minister Theresa May.

But the pound's tumble gave a boost to dollar-earning companies on the FTSE 100 <.FTSE>, with Unilever (>> Unilever), Diageo and AstraZeneca (>> AstraZeneca) up around 1 percent or more. Oil majors Royal Dutch Shell and BP (>> BP) also received a helping hand from the currency.

Cruise operator Carnival was the biggest gainer on the day, up 1.7 percent (>> Carnival).

"While UK equities remain vulnerable in the face of uncertain Brexit negotiations, we believe they are supported by the robust global economy as the FTSE 100 generates about two-thirds of its revenue from outside the country," Coutts analysts told clients.

The bank added that its UK equity portfolio was "tilted towards high-quality large-cap companies with significant overseas earnings which make them less dependent on the domestic economy."

The FTSE 100 index closed 0.2 percent lower, however, as financials took a beating from political uncertainty. Shares in RBS (>> Royal Bank of Scotland Group), Lloyds (>> Lloyds Banking Group), HSBC (>> HSBC Holdings), Standard Chartered (>> Standard Chartered) and Barclays (>> Barclays) closed lower.

The sector took as much as nine points off the index.

Mid-sized companies bore the brunt of currency weakness, with the index <.FTMC> falling for the sixth day in a row and losing more than one percent.

Rory McPherson, head of investment strategy at PSigma, said he had switched out of domestic companies and into large-caps to benefit from likely falls in sterling in the event of a leadership election.

"A lot of companies close to the consumer have guided downwards in terms of outlook for the UK," McPherson said.

That view appeared to be borne out by a survey from payments company Visa which found British shoppers reined in their spending by the most in four years in October.

Supermarket chains Sainsbury's (>> J Sainsbury), Morrison's and Marks & Spencer (>> Marks & Spencer Group) fell between 1.5 and 3 percent.

Analysts have also downgraded their earnings estimates for small-cap companies, indicating potential weakness ahead for the best-performing part of the UK stock market this year.

The day's worst performer was defence contractor Babcock (>> Babcock International Group) which sank more than 7 percent

Defence contractor Ultra Electronics (>> Ultra Electronics) was the latest in a string of companies to issue a profit warning. Its shares plummeted to eight-year lows after it forecast a weaker second half. It closed almost 20 percent down on the day.

Liberum analysts cut their estimates for the company and removed a planned acquisition of U.S. company Sparton from their calculations because of uncertainty about its completion.

Defence contractors Babcock (>> Babcock International Group) fell more than 7 percent while BAE Systems (>> BAE Systems) lost 3.5 percent.

Coca Cola HBC (>> Coca Cola HBC AG) shares fell 5 percent following a downgrade to "neutral" by JPMorgan.

JP Morgan analysts said investors in the bottling company should take profits and await a better entry point after a potential deal to buy a stake in Coca Cola Beverages Africa.

(Reporting by Helen Reid; Editing by Matthew Mpoke Bigg)

By Helen Reid and Sujata Rao