London’s index of leading shares finished one per cent down at 5128.5 after worrying economic data from the United States and China added to continuing fears about a Greek default.
Friday’s 68.4-point fall means blue chip shares have fallen 13.7 per cent in the third quarter, the UK’s biggest companies seeing £212bn wiped off their value.
This is the worst performance since 2002, when the dot-com boom ended.
Friday’s jitters started when a monthly survey by banking giant HSBC found China’s manufacturing sector stagnant because of poor demand both at home and abroad.
Later, data from the US Commerce Department said incomes fell in August for the first time in nearly two years.
Meanwhile, fears remain in the eurozone as Greek Prime Minister George Papandreou pleaded with European leaders to release the next 8bn euro (£7bn) bailout designed to save his country from default.
European markets also plummeted, with shares in Germany’s Deutsche Bank and Commerzbank both down by more than 30 per cent.
France fared even worse, with Societe Generale down 50 per cent and BNP Paribas down 40 per cent.
The pound was up to 1.16 against the euro as the single currency was hit by weak retail figures in Germany, its biggest economy. Sterling also rose to 1.56 against the dollar.