LONDON — One year on from Britain's shock vote to leave the European Union and cracks are starting to appear in the FTSE 100's rally, as concerns on both political and economic fronts put U.K. shares on course for their third week of losses in a row.

The blue chip FTSE 100 index was down 0.2 per cent at 7,423.94 points at 9:39 a.m. (GMT), while mid caps were up 0.2 per cent.

U.K. shares were hit hard in the immediate aftermath of last June's Brexit vote, but recovered speedily as a fall in sterling boosted firms that earn revenue in foreign currencies.

While the FTSE ended 2016 up more than 14 per cent, fresh political concerns stemming from a hung parliament in the general election and uncertainty around Brexit negotiations have put the brakes on U.K. shares this year.

Despite hitting a series of record highs along the way, British blue chips are up just 4 per cent year to date with the FTSE the weakest major European market in terms of performance — in contrast the pan-European STOXX 600 has gained 7.4 per cent.

"The market tries to run higher looking at the benefits from the weaker pound, but then is struck back by the reality of the fact that this is an inherently unsustainable situation," Ken Odeluga, market analyst at City Index, said.

Though sectors such as housebuilders, which were hit hard, have largely bounced back, investors remain concerned around firms exposed to the domestic UK economy, such as retailers.

"We expect subpar growth as Brexit bites. We see greater political instability, including a risk of early elections and a new government, but also a softer Brexit and easier policy," Morgan Stanley's economy and strategy team said in a note.

The picture is lackluster in dollar terms especially, with both the FTSE 100 and mid caps roughly flat since the Brexit vote.

A depressed sterling has increased concerns around a rise in inflation, which has hit shares in British retail stocks which could come under pressure as consumers' pockets are squeezed.

Firms in internationally-exposed sectors such as miners, tobacco companies and consumer goods have been clear winners, though renewed weakness in the price of oil has dogged the FTSE 100's energy constituents.

On Friday, dollar earners were the biggest fallers, with health stocks AstraZeneca and Shire, as well as Smurfit Kappa and Diageo all down between 1.2 and 1.7 per cent.

Oil heavyweight BP dropped 0.7 per cent and Royal Dutch Shell fell 0.5 per cent as the price of oil remained at depressed levels.