More than £40 billion wiped off the value of Britain's biggest companies
Chancellor George Osborne's efforts to calm the markets over Brexit proved fruitless as more than £40 billion was wiped off the value of Britain's biggest companies.
The FTSE 100 Index plunged back below the 6,000 mark, falling 156.5 points to 5,982.2, despite Mr Osborne offering his assurances that the UK is "about as strong as it could be to confront the challenge our country now faces".
On the currency markets, sterling plunged to a fresh 31-year low of 1.3151 US dollars, before rallying back to a 3.4% fall to 1.321 US dollars. Yields on 10-year government bonds also slid below 1% for the first time.
Chris Saint, senior analyst at Hargreaves Lansdown Currency, said: "It's a sea of red for sterling again this morning as investor sentiment continues to sour after the UK's vote to leave the EU."
He added: "Exchange rates will inevitably remain very volatile in the coming days and weeks as currency markets digest the far-reaching implications of the referendum result.
"Further significant losses for sterling aren't out of the question, especially if incoming data confirms the UK economy's slowdown and lifts the likelihood of further Bank of England stimulus to support growth."
Britain's vote to leave the European Union continued to wreak havoc on global markets, with Germany's Dax plummeting 3% and the Cac 40 in France plunging 2.9%.
Across the Atlantic, the Dow Jones Industrial Average was trading 1.4% lower.
The price of oil was 2.3% off at 47.32 US dollars a barrel amid uncertainty over Brexit and the strengthening dollar.
Meanwhile, heavyweight financial stocks, housebuilders and travel firms bore the brunt of the sell-off on the London market, with low-cost carrier easyJet sitting at the top of the biggest fallers after warning over profits.
Shares in easyJet were down 22% or 293p to 1020p after the firm said it would take a £28 million hit following two months of turbulence and warned that Brexit would have a negative impact on the airline.
It flagged strikes in France in May and June and severe weather leading to more than a thousand cancellations, with the EgyptAir tragedy also denting demand.
Royal Bank of Scotland briefly plunged to its lowest level since 2009, before finishing more than 15% down or 31p lower at 174.3p.
At one stage RBS - which is 73% owned by the taxpayer - and Barclays saw their shares suspended for five minutes as automatic circuit breakers sprung into action when their values dropped by more than 8%.
Shares in Barclays finished 17% lower, a drop of 26.7p to 127.2p.
Housebuilders were also the victim of a sharp sell-off, with Barratt Developments falling 85.4p to 354.4p and Charles Church-owner Persimmon slipping 210p to 1310p
However, precious metal miners were in the ascendancy as investors headed for safe havens, with gold miner Randgold Resources and silver miner Fresnillo lifting 665p to 8035p and 97p to 1483p respectively.
Away from the top tier, the FTSE 250 - seen as a better barometer of UK business than the FTSE 100 - slumped nearly 7% to 14,967.86 as it continued to be battered by Brexit.
Shares in Foxtons crashed 22%, dropping 30.5p to 104.5p, after the estate agent issued a Brexit profit warning.
The estate agency, which dropped out of the FTSE 250 in December, took a tumble after it said the upturn it had expected in the second half of the year is "now unlikely to materialise", adding that annual earnings will be "significantly lower" than in 2015.
The biggest risers on the FTSE 100 were Randgold Resources up 665p to 8035p, Fresnillo up 97p to 1483p, AstraZeneca up 94.5p to 4126p, Royal Dutch Shell B up 39p to 1922.5p.
The biggest fallers were easyJet down 293p to 1020p, Barratt Developments down 85.4p to 354.4p, Barclays down 26.7p to 127.2p, Travis Perkins down 272p to 1348p.