Amid uncertainty over whether a deal on the terms of Britain's exit from the European Union will be agreed in time, manufacturers scrambled to stockpile goods in January at the fastest rate since records began in the early 1990s, the IHS Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) showed.

"The PMI data has taken the shine off sterling after last month's rally and there is a bit of profit taking at these levels," said Lee Hardman, a currency strategist at MUFG in London.

The survey also showed deepening pessimism, with British factory output growing by the smallest amount since July 2016.

That sent the pound skidding against the euro initially, with the British currency weakening more than half a percent to a 10-day low at 87.93 pence.

The sharp and sudden losses against the euro rippled over to the dollar, yanking the pound below the 200-day moving average of $1.3045. It was trading at $1.3066, down a third of a percent against the greenback.

While the pound trimmed losses against both the dollar and the euro subsequently, the outlook for the pound remained cautious for now.

A close of the pound below that level would open the door for more potential losses as investors try to figure out whether May's Conservative Party rallying around her has increased the chances of her securing concessions from the EU or has pushed Britain toward further deadlock and uncertainty.

British foreign minister Jeremy Hunt said on Thursday the UK government would take a few days to formulate new proposals for the Irish border. He also hinted an extension to the Brexit process, beyond exit day on March 29, might be required.