UPDATE 3-Turmoil over future of PM May, Brexit bruises British stocks

* FTSE 100, FTSE 250 down 1.4%
* Worries mount over May's future, Brexit prospects
* TUI falls after Barclays "staycation" study
* Serco surges after deal to buy U.S. defence supplier

(Adds news items, comment, graphic, updates to closing prices)
By Shashwat Awasthi and Yadarisa Shabong
May 23 (Reuters) - Heightened concerns over the course of
Brexit and mounting pressure on Prime Minister Theresa May to
step down weighed heavily on Britain's mid-cap index and
domestically-focused blue-chip stocks on Thursday.
As the pound fell, the FTSE 250 .FTMC lost 1.4% to hit its
lowest point since March 29, when Britain was originally
scheduled to exit the European Union. Dublin's main index
.ISEQ , often regarded as a barometer of Brexit jitters, was
also down nearly 1.4%.
May's final attempt to muster parliamentary support for a
divorce deal on Wednesday sparked a fierce backlash by some of
her Brexit-supporting ministers. The turmoil was compounded when
prominent Brexit supporter and Leader of the House of Commons,
Andrea Leadsom, resigned from the government.
This cast further uncertainty over Britain's political scene
and sparked a sell-off in sterling, amid speculation that other
ministers could also quit, and re-emerging fears of a "no-deal"
Brexit after May is replaced. GBP/
"For sterling it will depend entirely on what, or rather
who, is next (as UK prime minister). In the interim we should
expect volatility in sterling crosses to remain elevated,"
Markets.com analyst Neil Wilson said.
Britain-focused banks and industrial stocks on the FTSE 100
.FTSE were also hit as the index fell 1.4%, though sterling's
slide helped its exporter stocks gain despite lingering global
trade concerns.
As May's premiership hung in the balance, Royal Mail RMG.L
skidded 10.3% to a record low on the mid-cap index.
"There is a very slight risk that with Theresa May in
turmoil a (Jeremy) Corbyn government is more likely and he would
nationalise businesses like Royal Mail," a trader said.
Oil majors were the biggest drags on the FTSE 100 as
unresolved Sino-U.S. trade tensions hit demand outlook and
pressured oil prices. O/R
Shares of TUI TUIT.L fell 4.8% to the bottom of the main
bourse after a survey by Barclays showed more Britons would opt
for "staycations" this year over heading for trips abroad, with
many citing the impact of Brexit on travel and finances.
Mid-cap outsourcing firm Serco SRP.L jumped 7.4% on its
best day in more than five months, after saying it would buy
U.S. Navy supplier Alion's Naval Systems Business Unit.
Madame Tussauds-owner Merlin Entertainments MERL.L
advanced 7.5% after hedge fund ValueAct urged it to explore a
go-private deal, calculating the move could boost the company's
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FTSE on track for monthly loss but outperforms STOXX 600 https://tmsnrt.rs/2YH6l69
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