Britain's FTSE boosted by PMI ahead of election

* FTSE 100 up 0.5 percent

* Imperial Tobacco (LSE: IMT.L - news) lifts sector with results

* Last day of campaigning before British election (Adds comments, updates prices)

By Alistair Smout and Liisa Tuhkanen

GLASGOW/LONDON, May 6 (Reuters) - Britain's top share index rose on Wednesday, boosted by a survey showing that the country's huge service sector unexpectedly picked up speed last month, although activity was muted ahead of Thursday's parliamentary election.

The Markit/CIPS services purchasing managers' index (PMI) climbed to an eight-month high in April, countering other signs that the economy was slowing down. Indicators from Europe were also positive.

"In the UK and in Europe, the service sector PMIs were just better than expected and that's what's helping lift sentiment," said Jasper Lawler, analyst at CMC Markets.

Britain's blue-chip FTSE 100 index was up 0.5 percent at 6,962.58 points going into the close of the trading session. The FTSE, which hit a record high of 7,122.74 points last month, is up around 6 percent so far in 2015.

Software (Xetra: 330400 - news) company Sage was the top gainer, up 6.5 percent, after posting organic revenue of 682 million pounds ($1 billion), in line with its 6 percent growth target for the year.

Reassuring results also lifted tobacco and engineering sectors. Imperial Tobacco Group rose 2.9 percent after it stood by its outlook for the remainder of 2015, despite reporting a 5 percent decline in underlying tobacco sales volume in the first half of its fiscal year.

Rival British American Tobacco advanced 1.3 percent after Imperial Tobacco's results, while engineer GKN rose 2.1 percent after reporting a 1 percent rise in organic sales and forecasting further growth this year.

ELECTION

Many traders were focused on Thursday's election, the most unpredictable in a generation in Britain, the world's fifth biggest economy. The two main parties are level in most polls and neither is on track to command a majority in parliament.

Polls put the right-wing Conservatives neck-and-neck with the opposition left-wing Labour party, while the Scottish National Party (SNP) could emerge as the third-biggest party.

A further risk stems from the Conservatives promising a referendum on Britain's membership of the European Union by the end of 2017, if they win.

Nerves over the election have hit sterling, but the stock market reaction has been more muted.

While specific sectors at risk of further regulation, such as utilities, have underperformed this year, domestically exposed stocks have actually outperformed the internationally oriented FTSE 100. http://link.reuters.com/gef44w

The FTSE 100 Volatility Index, a gauge of investors' fears, fell 7.4 percent on Wednesday and remains down from peak levels reached in January.

Nevertheless, some analysts said uncertainty around the election may keep investors on the sidelines for the next few weeks as talks to form a new government begin.

Logic Investments' Harry Shann said the FTSE could fall to 6,800 points. "We're seeing a lot of complacency in the FTSE ahead of the election, but we still expect the FTSE to fall on the back of the uncertainty over the vote," said Shann. (Editing by Mark Heinrich)