By Danilo Masoni
MILAN (Reuters) - British shares fell on Monday as concerns over slowing economic growth hit global stocks and investors braced for a crucial vote on Tuesday over Prime Minister Theresa May's Brexit deal.
The UK Parliament is expected to reject her divorce deal, heightening political tension in Europe's second largest economy and perhaps paving the way for a general election.
The FTSE 100 <.FTSE> top share index was down 0.4 percent by 1000 GMT, while the more domestically focused FTSE 250 <.FTMC> index fell 0.8 percent, sliding back to its lowest level since December 2016.
"Given the way political risk is starting to be priced into the market, we could see further losses if, or rather when, the prime minister loses her Brexit vote," said Neil Wilson, Chief Market Analyst at Markets.com.
"Whilst a weaker pound could offer some support, a very high political risk premium would tend to trump that and drag the market lower. Investors will have to start, if they haven't already, to price in the risk of a general election and Labour-led government," he added.
Top fallers on the FTSE were utilities Centrica
Analysts say that a Labour-led government and a threat of a nationalisation of utilities would put further pressure on the sector.
"Remember that Labour had previously threatened to nationalise utilities and Royal Mail, so investors may be starting to price in a higher likelihood of a general election in the near future and for Labour to have a strengthening hand," said Russ Mould, investment director at AJ Bell.
Traders said Centrica was also penalised after a Sunday Telegraph reported that the owner of Britain's largest energy supplier British Gas could struggle to pay dividends.
Housebuilders, which are also highly sensitive to Brexit developments, were broadly lower as tension built and analyst at Peel Hunt cut their ratings and price targets.
Shares in Berkeley Group
Shares in pension provider Just Group
"This appears a good announcement for Just Group and removes a considerable amount of the uncertainty faced by shareholders," said Numis in a note.
Among the few gainers were shares in precious metal miner Randgold
Shares in Interserve
(Reporting by Danilo Masoni; Editing by Richard Balmforth)