The blue chip FTSE 100 index ended the session down 0.7 percent at 7,563.21 points, underperforming a broadly positive European equity markets.

The EU's Barnier said that the bloc was prepared to offer Britain a partnership, though no "single market a la carte", which sent sterling soaring.

"Barnier's comments are clearly positive for the Brexit negotiations and indicates that we are about to get some sort of deal before the end of the year," Neil Wilson, chief market analyst for Markets.com, said.

The FTSE tends to come under pressure from a stronger domestic currency, given that a sizeable chunk of its constituents earn revenues in dollars.

Stocks in the consumer staples sector came under particular pressure, with shares in British American Tobacco and Diageo down 1.4 percent and 0.4 percent respectively.

Shares in UK-listed oil and gas firms took the most points off the index, with BP and Royal Dutch Shell both down around 1 percent.

Shares in mining companies were also on the backfoot as worries over Chinese demand and a stronger dollar hit the price of London copper.

Glencore, Rio Tinto BHP Billiton and Anglo American all retreated between 0.7 to 1.8 percent.

The mood in markets more broadly was cautious, however, as optimism faded over a proposed trade deal between the United States and Mexico given that questions remain over whether Canada will also agree to the revised trade terms.

A looming deadline on US tariffs with China also kept markets on edge.

"There is still a little optimism doing the rounds in light of the US-Mexico trade deal, but investors haven't been given another reason to buy into the market," David Madden, market analyst at CMC Markets UK, said.

The UK's mid cap index was also subdued, trading 0.5 percent lower.

In a sign of confidence, however, luxury carmaker Aston Martin set out plans to float on the London Stock Exchange, hoping to complete the flotation this year.

"The brand strength is unquestionable but at the end of the day some investors will only want to get involved if the business can sell more units than it did in the previous year and at a higher price, and continue this trend ad infinitum," said Russ Mould, investment director at AJ Bell.