The FTSE 100 <.FTSE> index was up 0.1 percent, in line with a broadly flat European market.

British banks <.FTNMX8350> pared earlier gains to rise 0.3 percent after the previous session's advance supported by hawkish rhetoric from the U.S. Federal Reserve earlier in the week and U.S. President Donald Trump's plan to reform tax.

Banking stocks have reacted positively to any signs of rising interest rates which would help their margins, but analysts were sceptical of how fast these would materialise.

"UK banks might possibly benefit from higher interest rates which could bolster their margins, but I fear the economy does not look ready for an interest rate rise," said Chris Kinder, portfolio manager at Columbia Threadneedle, in a note.

An update on Brexit negotiations from the European Union's chief negotiator Michel Barnier, who said talks had progressed but there was much still to do, momentarily sent sterling higher and weighed on the internationally-exposed FTSE.

Global equity funds are shifting out of the UK and into Europe, with positioning in the UK falling over the past two months, figures from HSBC showed.

On the day tobacco group Imperial Brands (>> Imperial Brands) was the top faller, down 4 percent after it said it would meet profit expectations for the year, though it noted a difficult market.

"While Imperial's strategy remains eminently sensible, the external environment remains very challenging, with regulatory headwinds intensifying and the shift to Next Generation Products accelerating," said Charlie Huggins, fund manager at Hargreaves Lansdown.

Mid-cap travel retail company SSP Group (>> SSP Group PLC) jumped 6 percent to the top of the STOXX after a surprise trading update showed strong growth.

"While today's Q4 trading update is additionally flattered by positive FX gains and the deferral of some unit redevelopments, it nevertheless shows broad-based growth across all regions," said Liberum leisure sector analysts.

EasyJet shares fell 1.8 percent after the airline's capital markets day on Wednesday.

"Although the capital markets day re-enforces strategy we do not think anything materially new was learnt from a share price perspective," said UBS analysts.

Gains among industrial stocks boosted British mid caps <.FTMC>, which rose 0.6 percent.

Infrastructure firm Balfour Beatty (>> Balfour Beatty) was among top gainers, jumping 5.6 percent after broker Peel Hunt upgraded the stock to "buy" from "add", citing the company's Investments division as a key driver of value.

Outsourcer Carillion (>> Carillion) surged 16 percent, taking its two-day gains to 37 percent after City AM newspaper reported on Wednesday that a Middle Eastern firm was preparing a bid for it.

A trader said the sharp move could also be due to short sellers unwinding and adding to buying pressure on the stock.

(Reporting by Kit Rees)

By Kit Rees and Helen Reid