Watch: Pound and FTSE 100 fall sharply as markets react to Europe's UK travel bans

Billions of pounds were wiped off the value of UK stocks and the pound tumbled on Monday, as panic set in about a new, more infectious strain of COVID-19 discovered in Britain.

Fresh restrictions were announced across much of Britain on Saturday as the government sought to contain the spread of the new strain discovered last week. Countries around the world then began to shut their borders to the UK for fear of importing the new COVID-19 strain. Stock markets around the globe fell sharply amid fears that the strain may have already spread.

The FTSE 100 (^FTSE) dropped 2% when the London Stock Exchange opened, wiping ￡33bn off the index. The sell-off deepened as trading continued and the bluechip index was down 3% by mid-morning. The more domestically-focused FTSE 250 (^FTMC) fell 3.5%.

Pressure on UK stocks began to ease by lunchtime after France’s transport minister said the country was looking at restarting the trade of goods with Britain. Still, the FTSE 100 closed down 1.75% and the FTSE 250 ended the day down 2%.

The pound was down 1% against the euro to €1.0917 (GBPEUR=X) by the end of the trading day in London. Sterling was down 1.3% against the dollar to $1.3342 (GBPUSD=X). Losses had been steeper earlier in the session.

Panic spread beyond the UK. European stock indexes dropped over 3% at one point and Wall Street sunk at the open in New York.

The global sell-off was triggered by developments in Britain over the weekend.

Prime minister Boris Johnson held an emergency press conference on Saturday announcing the return of lockdown-like conditions for millions of people in London, the South East, and the East of England. The new “Tier 4” restrictions were introduced to curb the rapid spread of a new variant of COVID-19, discovered last week. The prime minister said the new strain spreads up to 70% faster than the previous version of the virus.

On Sunday, multiple European countries closed their borders to Brits for fear of importing this new strain. This included France, which banned freight and people travelling from the UK. France said its ban would stand for an initial 48 hours.

READ MORE: UK economy in crisis as countries ban flights and freight from UK

The French decree shut down the Eurotunnel and much of the Port of Dover. The Port of Dover accounts for around a fifth of all trade with the EU, raising the prospect of shortages around Christmas.

“This is a key supply route for fresh produce at this time of year: the channel crossings see 10,000 trucks passing daily during peak periods such as in the run up to Christmas,” said Andrew Opie, director of food and sustainability at the British Retail Consortium.