The FTSE 100 was flat, but marked its third weekly decline and the biggest in three months. The domestically focused FTSE 250 index reversed early gains to end the day 0.4% lower, also logging a weekly loss.

Data showed British retailers suffered the biggest drop in sales in almost three years during December, raising the risk that the economy entered a recession in the fourth quarter.

Retail sales volumes shrank 3.2% between December and November as people did their Christmas shopping earlier than usual. The numbers were worse than economists' forecast for a 0.5% drop.

"The gloomy UK retail sales figures shouldn't have been a surprise given the messages coming out of listed retailers over the past few weeks," said Russ Mould, investment director at AJ Bell.

The drop in retail sales comes after Wednesday's stronger-than-expected UK inflation reading that tempered expectations around early interest rate cuts this year by the Bank of England.

The automobiles and parts index was the bottom performer, with a 2.6% drop, touching lowest levels in over two months.

Non-life insurers index led sectoral gains with a 1.1% rise, although touching lowest weekly levels in over two months.

Among individual stocks, FTSE 100's top stock Flutter Entertainment was up 3.1% on a series of price target hikes, extending a rise of over 15% in the previous session.

4imprint Group jumped 12.0% to become the top gainer in the midcap index after the advertising and marketing company raised its profit forecast.

The broader media index gained 0.4% on the news.

Wincanton rallied 48.0% to a 2-1/2-year high after CEVA Logistics, a unit of French shipping group CMA CGM, said it would buy the British logistics firm in an all-cash deal worth nearly 600 million pounds (about $719 million).

(Reporting by Sruthi Shankar, Khushi Singh in Bengaluru; Editing by Sonia Cheema, Sherry Jacob-Phillips and Alison Williams)

By Sruthi Shankar and Khushi Singh