By Helen Reid
LONDON (Reuters) - British shares edged lower on Tuesday, weighed down by banking stocks as Britain gets set to start negotiating its departure from the European Union.
The blue-chip index closed 0.1 percent lower despite support from the weak pound, which hit an eight-week low against the dollar. The FTSE's foreign-currency-earning constituents benefit when sterling dips.
Sterling's decline was a reflection of the imminent triggering of Brexit negotiations and Scotland's call on Monday for a second independence referendum. Britain's parliament approved legislation on Monday to allow the country to begin talks on leaving the European Union.
The uncertainty also prompted selling of banking stocks.
RBS was the worst-performing bank, down 2.5 percent on the day, while Standard Chartered and Lloyds also dropped 1 to 1.2 percent.
Analysts said the prospect of a new Scottish independence referendum could be weighing on shares of Scotland's biggest banks, RBS and Lloyds .
Ratings agency Fitch said Scottish independence would increase the risks for Britain's credit rating.
Prudential was the top FTSE gainer, its shares rising 3 percent to a two-year high after the insurer reported a record profit for 2016, spurred by growth in its Asian business.
The more domestically focused mid-caps index hit a record high in early trading, before turning down to close 0.4 percent lower.
Oil services company Wood Group gave back all its gains from the acquisition of Amec Foster announced on Monday, and was among worst-performing mid-cap stocks, down 6 percent, while Target Amec Foster fell 6.4 percent.
While lower crude prices were weighing on oil services stocks, shareholders were also concerned that the deal would reduce Wood Group's exposure to an expected medium-term rebound in oil prices, RBC analyst Victoria McCulloch said.
Building materials supplier SIG rose 7.2 percent after it named a new CEO and said it planned to sell assets and review costs as it battles to recover from weak trading.
(Reporting by Helen Reid, Danilo Masoni; Editing by Larry King)