Shares in Royal Bank of Scotland soared on Monday after the Government proposed an alternative to the bank's attempts to sell Williams & Glyn (W&G).
RBS jumped more than 6%, or 16.5p to 258.9p, following an announcement of the Treasury's proposals late on Friday that outlined an alternative £750 million plan to boost competition in the banking market in an attempt to appease officials in Brussels.
But while investors cheered the move, the wider FTSE 100 Index was flat, slipping 0.1 to 7,299.86 points.
The embattled bank is required to sell W&G as one of the conditions for the multibillion-pound bailout by the UK Government following the banking crisis, but has struggled to strike a deal.
The Treasury has been in talks with the European Commission (EC) for months about the situation and will now seek formal changes to the state aid commitments.
Within the proposed package will be a fund, administered by an independent body, which challenger banks can access to increase their business banking capabilities.
Competition commissioner Margrethe Vestager will propose to the College of Commissioners that they open proceedings to gather evidence on the new plan, which contains a number of measures aimed at helping small and medium-sized enterprises (SMEs).
Across Europe, Germany's Dax was up 0.6% and the Cac 40 in France rose marginally.
The price of oil climbed 0.7% to 56.21 US dollars a barrel, but rising output from US drilling rigs and high stockpiles kept a lid on gains.
On the currency markets, the pound was largely unmoved after an economic update on Britain's manufacturing industry showed orders had reached a two-year high in February.
The Confederation of British Industry (CBI) industrial trends survey showed that total order books improved further over the three months to February to a balance of 8%, rising from 5% in January and 0% in December.
The jump was led by demand in the mechanical engineering and metal production sectors, leading to the highest balance since February 2015.
Sterling was up 0.4% to 1.246 against the greenback and 0.4% higher versus the euro at 1.173.
In UK stocks, shares in Unilever slumped after US food giant Kraft Heinz called off its proposed 143 billion US dollar (£115 billion) mega-merger with the consumer goods firm.
The Anglo-Dutch company dropped more than 6%, or 249p to 3,548p, following a joint statement by the two companies on Sunday which said Kraft Heinz had "amicably agreed" to withdraw its proposal.
Unilever had issued a strongly-worded rebuttal on Friday after the Chicago-based company tabled an offer representing an 18% premium on Unilever's closing share price on February 16.
If successful, the deal would have been the biggest acquisition of a British company based on offer value.
Kraft Heinz brands include Heinz Tomato Ketchup and Philadelphia cheese, while Unilever owns store-cupboard staples such as Marmite, PG Tips and Hellmann's.
Kathleen Brooks, research director at City Index Direct, said managers at Kraft Heinz would be ''spitting feathers'' after their proposed offer was leaked on Friday.
''We expect the chief reason to drop the bid was concern about the political atmosphere in Britain, which is currently against foreigners making bids for 'national treasures', even half-Dutch ones like Unilever.
''Also, the leaked announcement sent Unilever shares surging 15% on Friday, so a protracted battle for ownership would have made it an expensive deal for Buffet and co. at Kraft Heinz.''
The biggest risers on the FTSE 100 Index were Royal Bank of Scotland, up 16.5p to 258.9p, Rolls-Royce Holdings, up 42p to 708p, Hammerson, up 24p to 588.5p, Antofagasta, up 21.5p to 858.5p.
The biggest fallers on the FTSE 100 Index were Unilever, down 249p to 3,548p, Pearson, down 26p to 642.5p, Mediclinic International, down 26p to 802p, and Capita, down 8p to 514p.
ends
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