Britain's FTSE falls, weighed down by concerns over China

* FTSE 100 down 1.2 pct

* HSS hire plummets after price target cuts

* Betfair gains on merger talk

By Liisa Tuhkanen

LONDON, Aug 26 (Reuters) - Britain's top share index fell on Wednesday, tracking declines in European and Asian markets as worries over China's economy continued to weigh on equities around the world.

The blue chip FTSE 100 index was down 1.2 percent by 0823 GMT, with all but two individual companies in the red and broadly in line with European peers.

The index posted its biggest one-day rise since 2011 on Tuesday after China cut interest rates to calm markets.

The relief didn't last, as investors quickly resumed their focus on the deteriorating outlook for China and its impact on the global economy. ID:nL4N11067X]

"On the face of it yesterday's actions by the People's Bank of China should have acted as the palliative that equity markets were looking for, and for a while it seemed to work quite well," Michael Hewson, analyst at CMC Markets, said in a note.

"And yet there was always the nagging doubt that it was a mere attempt at window dressing to assuage a sulky market."

The broad sell-off in UK-based shares was lead by miners, with FTSE 350 mining index down 1.6 percent.

Glencore (Xetra: A1JAGV - news) was one of the top fallers, shedding 2.3 percent after South Africa's Eskom said it wants compensation from Glencore's mining subsidiary Optimum if it is unable to supply coal to Eskom's Hendrina power plant.

BHP Billiton (NYSE: BBL - news) fell 1.1 percent as rating agencies said that its investment-grade credit ratings might come under pressure in the current financial year.

Among smaller companies, HSS Hire plummeted 35.7 percent after the tool and equipment hire company said it expected earnings below market expectations and as Numis and JP Morgan (Other OTC: MGHL - news) cut their price target for the stock.

"A second profit warning within six months of the IPO has reduced our confidence that HSS can deliver growth rates significantly ahead of the market," Numis said in a note.

On the upside, shares in mid cap Betfair soared 21 percent after the online gambling company and Irish rival Paddy Power said they had reached an agreement in principle on a possible merger, marking the latest in a string of possible tie-ups across the sector. (Reporting by Liisa Tuhkanen; Editing by Dominic Evans)