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(Corrects 8th paragraph to show that jump in volatility took place over two weeks)
* FTSE 100 down 0.3 pct, off 2.8 percent so far this week
* Investors hedge bets ahead of weekend Crimea vote
* Britain less exposed to Russia risk than continent
* BP lends support after U.S. lifts federal contract ban
By Alistair Smout
LONDON, March 14 (Reuters) - Britain's top shares fell on Friday, setting them up for their biggest weekly decline since June as tensions over Ukraine ramped up, hitting growth-driven stocks in particular.
The FTSE 100 - down 19.46 points, or 0.3 percent, at 6,534.32 by 0835 GMT - has fallen 2.8 percent this week. Its record weekly fall last year was triggered by the Federal Reserve hinting it would taper economic stimulus later in 2013.
The fund management, retail and mining sectors - all highly sensitive to optimism over the economy - came under pressure, as investors looked to reduce exposure to risk heading into the weekend, when Ukrainians in Crimea vote on whether to join Russia.
Russia made it clear it would veto a U.S.-drafted UN resolution to declare Sunday's referendum illegal, and launched new exercises near its Ukrainian border in the face of sterner-than-expected sanctions from the United States and the EU.
"Today has the the distinct whiff of a 'risk-off' day as traders clear the decks ahead of Crimea voting this weekend," Alastair McCaig, analyst at IG, said.
"We've broken through 50-day and 200-hundred day moving averages by a chunk, and that's no real surprise. Every noise I've heard suggests that Crimea will vote to join Russia ... and while the market is expecting that, it's the consequences of it that make it more problematic."
The FTSE has fallen 1 percent in each session this week, taking the index clearly below a number of moving averages that have converged near the 6,700 level.
Volatility on the FTSE, a gauge of investor fear used in pricing protection against future swings, is up 23.8 percent in the last two weeks.
British stocks outperformed continental peers such as the German DAX, however, as they are less exposed to Russia, and also saw corporate newsflow prop up some of the most heavily weighted stocks.
BP added 2.1 points to the index after the U.S. government lifted a ban that excluded the oil major, which is the fifth biggest stock on the FTSE 100, from new federal contracts.
"The agreement was largely anticipated and should be seen as a small positive for the shares," Liberum analysts said in a note. (Editing by Louise Ireland)