Markets also got a lift after data showed Britain's public sector budget deficit narrowed more than expected in April, giving finance minister George Osborne a boost as he renews his push to fix the country's finances.

"(Osborne) will be very pleased with the good start to the fiscal year," said Howard Archer, an economist at IHS Global Insight.

Vodafone rose almost 5 percent, following upgrades from Citi and Deutsche Bank.

Both brokers cited comments earlier in the week from Liberty Global chairman John Malone that Vodafone would be a "great fit" for the company.

Vodafone is up 12 percent since Wednesday. Goldman Sachs said that following an investor meeting on Thursday, it believed the company was considering a range of options.

"There is significant industrial logic in fixed/mobile M&A on a market-by-market basis," analysts at Goldman said in a note, reiterating a "buy" rating on the stock.

"(Vodafone) is willing to consider both acquisitions and disposals where the financial rationale makes sense."

The FTSE 100 is now up 1.3 percent this week, set for its biggest weekly gain in more than a month.

It is only 1 percent away from an all time high hit in April, and has been in a tight 350 point trading range since late January.

Precious metals miners gave up some of their gains after gold prices fell, hit by a bounce-back for the dollar after a stronger-than-expected rise in U.S. consumer prices in April.

Electronics retailer Dixons Carphone rose 1.4 percent and housebuilder Travis Perkins was up 1.6 percent, benefiting from upgrades to target prices from Deutsche Bank and Jefferies respectively.

Among fallers, British water supplier Severn Trent fell 0.6 percent after results. Although it reported a 3.2 percent rise in underlying full-year profit, profit before tax fell by over 50 percent.

And online trading firm Plus500 lost more than one-third of its London-listed market value as it said it had put in place a comprehensive remediation plan to re-enable currently suspended customers and that it would update the market again on May 27. The company said earlier this week some accounts had been suspended as it sought to meet money-laundering rules.

(Reporting by Alistair Smout; Editing by Janet Lawrence)

By Alistair Smout and Lionel Laurent