*

FTSE 100 down 0.9%, FTSE 250 down 2.2%

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Sterling, British gilts sell off with spotlight on UK

finances

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Ithaca Energy ( ITHLF ) down after top investors sell stake at a

discount

(Updates after market close)

By Sukriti Gupta

Sept 2 (Reuters) - UK shares closed lower on Tuesday,

pushed down by rate-sensitive banks, industrials and utility

stocks on mounting investor concerns about public finances.

The blue-chip FTSE 100 closed 0.9% lower, while the

domestic-focused midcap index fell 2.2%. Both logged

their worst day in nearly five months.

Britain's 30-year borrowing costs rose to their highest

levels in over 27 years, while sterling slid more than 1.5%

, amid investor anxiety about the UK's ability to get its

finances under control.

Thirty-year gilt yields rose to 5.72%, their

highest since May 1998.

Prime Minister Keir Starmer on Monday

reshuffled

his top team of advisers, to bolster economic expertise

before a budget later this year that is expected to include

further tax rises, but also sparking headlines that the move had

weakened finance minister Rachel Reeves.

"There's a feeling that the government doesn't really have a

solution ...they've been floating different ideas about how to

fill the budget deficit (but) don't seem to have a concrete

plan," said Nick Saunders, CEO of investment platform Webull.

"Coupled with the sort-of-a cabinet reshuffle in London

... there's a worry that the chancellor is on her way out."

Heavyweight banking stocks, which had

marginally rebounded in the previous session after Friday's

declines, fell on the day. NatWest ( NWG ), Barclays ( BCS )

and Lloyds were down about 2% each.

They had fallen on Friday after a think-tank recommended a

new tax on lenders as a possible way for Reeves to raise

revenue.

The real estate sector declined, with Segro ( SEGXF )

down 3.9%. Utility stocks fell, with SSE

losing 3.7%.

Insurers Legal & General ( LGGNF ) and Phoenix fell

over 4% each.

Retailers and consumer groups such as Tesco ( TSCDF ), M&S

and British American Tobacco ( BTI ) also declined.

Travel and leisure stocks fell. British

Airways owner IAG was down 3.3% and Whitbread ( WTBCF )

lost 4.5%.

Aerospace and defence companies also fell,

with Rolls-Royce down 2.9%.

Conversely, the energy sector added 0.5%,

tracking higher oil prices.

The healthcare sector rose 0.2%. Precious

metal miners advanced, tracking higher gold

prices, with Fresnillo up 5.2%.

In company news, Ithaca Energy ( ITHLF ) fell 13.3%, to the

bottom of the mid-cap index, after its two largest shareholders

sold a stake of about 3% at a discount.

Oxford Nanopore Technologies ( ONTTF ) fell 12.8% on keeping

full-year guidance unchanged, despite expectations of an

upgrade.