The benchmark index, dominated by global companies, closed 0.3 percent higher at a life-time peak of 7,142.83 points on Friday, surpassing the previous record of 7,129.83 set in October this year. It surged 14.4 percent in 2016, outperforming major European indexes by a big margin.

The pan-European STOXX Europe 600 index fell around 1.6 percent in 2016, while Italy's benchmark FTSE MIB <.FTMIB> slumped about 10 percent. Germany's DAX <.GDAXI> and France's CAC <.FCHI> were up 6.9 percent and 4.7 percent respectively.

Analysts said a sharp fall in sterling boosted the index's export-oriented companies, which generate a large portion of their revenues in dollars. The resilience of the economy also helped in improving sentiment.

"The latest GDP figures point to a strong UK economy which has probably accounted for some of the pick-up in equity prices overall since the referendum," said Yael Selfin, head of macroeconomics at KPMG UK.

"So far major UK stocks appear to have defied pre-referendum predictions ... Most market watchers and participants agree this is thanks to the fall in sterling since 23 June as a number of the UK’s largest companies generate a large portion of their revenues in dollars," KPMG said.

The FTSE's climb was also due to a strong rally in the mining sub-index <.FTNMX1770>, which jumped 101.5 percent in 2016 on stronger metals prices and expectations that U.S. President-elect Donald Trump will keep his election pledge to boost infrastructure spending in the United States.

However, the country's domestically-focused mid-cap index <.FTMC> ended 0.3 percent higher on the day. It recorded a 3.7 percent gain for the year, underperforming the FTSE 100, as domestic firms did not get the benefit of a weaker currency. Concerns about higher inflation also hurt sentiment.

Shares in miner Anglo American (>> Anglo American plc) have surged 287 percent in 2016, followed by a 207 percent jump in miner and trader Glencore (>> Glencore PLC) and a 72 percent rise in global diversified miner BHP Billiton (>> BHP Billiton plc).

Energy stocks also performed well this year following a recovery in crude oil prices, with the UK oil and gas index <.FTNMX0530> spiking 50 percent in 2016.

The second half of 2016 also saw a sharp rebound in banking stocks as an improving global economic outlook, a rising U.S. rate environment and hopes of a lower level of regulation in the United States after Trump's victory prompted investors to return to so called cyclical stocks.

The UK banking index <.FTNMX8350> surged nearly 40 percent in the second half, and closed the year up more than 8 percent.

The UK stock market closed by midday on Friday.

(Reporting by Atul Prakash)

By Atul Prakash