UPDATE 2-FTSE 100 falls as trade dispute escalates, investors disconnect from Vodafone

* FTSE 100 down 0.6 pct; FTSE 250 down 1.2 pct

* China's retaliatory tariffs sink markets

* Vodafone drops on report of dividend cut

* Centrica gains after Q1 trading update

* Metro Bank skids to all-time low again (Adds news items, analyst comment, updates to closing prices)

By Shashwat Awasthi

May 13 (Reuters) - Britain's FTSE 100 slipped to a seven-week low as China slapped retaliatory tariffs on U.S. goods, further escalating their protracted trade dispute, and as telecom giant Vodafone slipped after a report of a dividend cut.

The FTSE 100 ended down 0.6% while the FTSE 250 tumbled 1.2% on Monday, led by a slump in Metro Bank .

"Make no mistake this is a serious escalation and we have a trade war on our hands again. The breakdown last week has not proved temporary and it seems China is prepared to go toe-to-toe with the U.S. on this," markets.com analyst Neil Wilson said.

Beijing said it would impose higher tariffs on most U.S. imports on a revised $60 billion target list, striking back at a tariff hike by Washington and easing investor appetite for risky assets.

The latest twist in the long-standing dispute hurt Asia-exposed stocks once again. Financial heavyweights were among the biggest drags on the main bourse, while an index of miners skidded to its lowest in almost three-and-a-half months.

"Traders don't think things will get much better yet, but this may be overly pessimistic," Wilson said.

Vodafone tumbled 5.2% on its worst day in nearly five years after The Times reported https://www.thetimes.co.uk/article/vodafone-ready-to-slash-dividend-to-pay-for-5g-g6d59xtxl that the world's second-biggest mobile operator was set to slash dividends to pay for auctions for mobile phone airwaves in Germany and Italy.

Brexit worries also weighed on sentiment, amid a lack of clarity over where cross-party talks were headed and growing calls for Prime Minister Theresa May's departure.

UK-focused banks and industrial groups traded in the red on both indexes.

ITV slipped 6.3% to be the worst performer on the FTSE 100. The broadcaster said The Jeremy Kyle Show, one of Britain's best-known daytime television programs, was taken off-air indefinitely after a guest died a week after appearing on the talk show.

But a notable blue-chip gainer was British Gas owner Centrica, which added 3% after maintaining its annual operating cash flow and net debt forecast and as defensive stocks were in demand.

Metro Bank, which has lost more than two-thirds of its value this year, fell 11% to hit another all-time low on the mid-cap index.

It said on Friday its plan to raise equity was well advanced, while a Financial Times report on Sunday said it was looking to sell loans that were hit by an accounting error.

(Reporting by Shashwat Awasthi and Muvija M in Bengaluru; editing by Jon Boyle and Ed Osmond)