The Ftse 100 slipped 30.5 points to 6,693.95 after the manufacturing sector, which accounts for around 10% of the UK economy, endured its sharpest fall for more than three years.
The closely watched Markit/ CIPS UK Manufacturing purchasing managers’ index fell to levels last seen in February 2013, as it hit 48.2 in July, down from 52.4 in June and below economists’ expectations of 49.1. A reading above 50 indicates growth.
The result will heap further pressure on the Bank of England to hand the UK economy a fresh dose of monetary stimulus when it votes on interest rates on Thursday.
Taylor Wimpey was the biggest faller on the London market, off more than 4% or 7p to 147.7p, while Barclays dropped 2% or 3.2p to 151.4p.
Germany’s Dax was marginally lower and the Cac 40 in France dropped 0.7%.
In stocks, supermarket chain Morrisons was down 4.3p to 181.5p as the market reacted coldly to its latest round of price cuts.
The grocer has pledged to trim 18% off the price of more than 1,000 products, as fierce competition in Britain’s supermarket price war shows little sign of abating.
The biggest risers on the Ftse were Anglo American up 18.3p to 848.8p, BHP Billiton up 18.6p to 963.3p, Associated British Foods up 46p to 2737p, and HIKMA Pharmaceuticals up 42p to 2676p.
The biggest fallers was Taylor Wimpey, Berkeley Group down 107p to 2,576p.