The Footsie fell 381.7 points to 3932.1, the index's lowest level since May 2003.

It follows plunges of 8% on Monday, 5% on Tuesday and 1% yesterday - and means the index has dived 21% this week alone, wiping pounds 250bn off the market values of Britain's biggest firms.

Yesterday's bloodbath came amid mounting fears over a deep economic downturn and further uncertainty for the battered banking sector.

More heavy falls for New York's Dow Jones Industrial Average following Thursday's 7.3% slump also aggravated the trading woes in London.

Banks dominated the Footsie's numerous fallers amid few signs that the Government's huge bail-out announced on Wednesday was having any impact.

Royal Bank of Scotland plunged 25%, or 24.3p to 71.7p, with Halifax Bank of Scotland not far behind, down 19%, or 29.3p to 124.2p.

Barclays was 14% lower, or 34.25p to 207.5p as it said it was considering a number of capital raising options in light of the UK government's pounds 25bn industry-wide recapitalisation offer.

The Footsie's sole riser was Thomson Reuters, up 1p to 1101p.

The four biggest fallers were Schroders, down 229 to 680p, Royal Bank of Scotland down 24.3p to 71.7p, HBOS down 29.3p to 124.2p and 3i Group, which closed down 97p at 500.5p.

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