The London market sank deeper into the red as investors punished outsourcing stocks amid persistent concerns over Capita's financial strength.
The FTSE 100 Index closed down 43.16 points to 7,490.39, with Capita continuing feel the impact of Wednesday's trading update when it warned over profits, suspended its dividend and announced an investor cash-call.
The firm's shares fell a further 13% on the second tier, down 23.9p to 158.6p, while sector rival Interserve also took a hit, dropping 19% or 20.9p to 85.9p on the FTSE 250.
Across Europe, Germany's Dax was down 1.4% and the Cac 40 in France slipped 0.5%.
On the currency markets, the pound chalked up gains against the US dollar as currency traders weighed the impact of a potential interest rate hike from the US Federal Reserve in March.
Sterling was up 0.4% to 1.42 US dollars, but slipped 0.1% versus the euro to 1.14 following a lacklustre update from the manufacturing sector.
Output in the manufacturing industry unexpectedly slipped at the start of the year as it grappled with a double-whammy hit of slowing growth and escalating costs.
The Markit/CIPS UK Manufacturing purchasing managers' index (PMI) showed a reading of 55.3 last month, down from 56.2 in December, with economists expecting a figure of 56.5.
A reading above 50 indicates growth.
The price of oil was up 0.8% to 69.39 US dollars a barrel after a report showed Opec-led supply cuts were helping to counter rising US production.
Focusing on UK stocks, telecoms giant Vodafone was the biggest faller on the top-flight as investors took a dim view of its third quarter update.
The group reported a 3.6% drop in total group revenue to 11.8 billion euros (£10.3 billion) over the three months to December 31, hit by a fall in both its European and Africa, Middle East & Asia Pacific (AMAP) divisions, which fell 2.8% and 5.6%, respectively.
Vodafone was down more than 4%, or 10.2p to 214.4p, as the decline was pinned on the "negative impact from the deconsolidation of Vodafone Netherlands" following the creation of its joint venture VodafoneZiggo, as well as foreign exchange rate movements.
Oil major Royal Dutch Shell was enduring a tough trading session despite hailing a "strong" annual performance after profits more than doubled thanks to the surging cost of crude.
The group posted underlying earnings of 15.8 billion dollars (£11.2 billion) for 2017, up from 7.2 billion dollars (£5.1 billion) the previous year.
Shell said bottom line profits jumped to 12.1 billion dollars (£8.5 billion), up from 3.5 billion dollars (£2.5 billion) in 2016, while fourth quarter underlying earnings rose 140% to 4.3 billion dollars (£3 billion).
Shares in Royal Dutch Shell B sank in excess of 2%, or 63.5p to 2,432.5p.
In a contrast of fortunes, Unilever finished up 32p to 4,032p as the consumer goods group cheered better than expected fourth quarter sales growths.
The Anglo-Dutch group, which is behind Dove, Marmite and Ben & Jerry's ice cream, posted a 4% increase in underlying sales in the final period of the year, ahead of market forecasts.
It was boosted by a 6.3% increase in emerging markets sales, with brands such as Knorr, Bango and Pot Noodle proving popular.
The biggest risers on the FTSE 100 Index were ITV up 5.9p to 172.9p, Smurfit Kappa up 60p to 2,532p, 3i Group up 20p to 951.4p, Evraz up 7.4p to 379.1p.
The biggest fallers were Vodafone down 10.2p to 214.4p, Royal Dutch Shell B down 63.5p to 2,432.5p, Relx down 38p to 1,520p, Royal Dutch Shell A down 56p to 2,406.5p.
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