The benchmark FTSE 100 slid 36.98 points lower to 6,807.82, as talks between Greece and its creditors broke down with the nation facing a €1.6 billion (£1.1bn) International Monetary Fund repayment on 30 June.
Eurozone ministers had returned to the negotiating table in Brussels to make their third attempt in four days to hammer out a deal after earlier talks halted after barely an hour.
Alastair McCaig, market analyst at IG, said: “The will-they-won’t-they Grexit debate surrounding Greece is doing an excellent job of ensuring that any possible benefits from a €60bn monthly QE scheme are being greatly negated.
“It seems that equity markets have become frozen in the headlights of this oncoming runaway train.”
High street sales figures for the UK added to the lacklustre performance on the market as the latest CBI survey showed retail sales growth eased in June, falling back from five-month highs in May.
Progress in the top flight was also held back as stocks such as water group United Utilities and credit checking agency Experian turned ex-dividend. United Utilities fell almost 4 per cent or 36.5p to 955p, while Experian was 6p off at 1,204p.
Third-quarter sales figures from Debenhams put the department store chain in the spotlight as it said moves to bring forward promotions such as its new season spectacular left sales flat in its third quarter. But shares edged 1 per cent higher in the FTSE 250, up 0.9p to 91.2p.
Back in the top tier, housebuilder Barratt Developments lifted 17.5p to 635.5p thanks to an upgrade from broker Jefferies, which sparked gains across the sector.