The EU is set to inflict a double humiliation by removing the European Banking Authority (EBA) and the European Medicines Agency (EMA) from the UK, the "Observer" newspaper reported on Sunday.

Watch video 00:42 EU outlines Brexit negotiation terms

The weekly paper said the announcement would be made within weeks, and is in retaliation for Britain's aggressive approach to negotiations over its future relationship with the EU after Brexit.

The "Observer" said EU diplomats agreed their position during talks last week. The decision is likely to see several other EU states compete to attract the reputable agencies.

The EBA was set up in 2011 to increase transparency in the European financial system and conduct stress tests on lenders. EMA is the European equivalent of the US Food and Drug Administration and has operated from London since 1995. Between them, the two agencies employ about 1,000 people.

The EBA and EMA were widely expected to leave Britain after last June's referendum on EU membership saw 52 percent versus 48 percent of voters in favor of leaving the bloc.

UK approach criticized

But the removal of the two agencies appears to have been speeded up due to the British government's threats to walk away from any "weak" deal with Brussels over its new relationship with the EU.

Germany's financial capital Frankfurt, along with Milan, Amsterdam and Paris are competing to offer new homes to the agencies.

The "Observer" reported that the EU's chief negotiator hopes the agencies will know their new locations by June.

Many analysts believe London's position as a major global financial hub is also threatened by the Brexit vote.

Trade talks delayed

The paper also said the UK government has failed to convince other EU states to begin new trade talks early during the two-year negotiation period set out in Article 50 of the Lisbon Treaty.

British Prime Minister Theresa May has threatened to turn the UK into a low tax, low regulation center if Brexit talks fail.

EU diplomats have backed the European Commission's plan to ensure that Britain settles an estimated 60 billion euro ($63.7 billion) divorce bill, before any future trade deal is discussed.

A senior EU diplomat told the "Observer" that initial sympathy with Britain had withered due to the British government's approach.

Meanwhile, British Prime Minister Theresa May used her Easter Sunday message to say the country was "coming together" following last year's divisive referendum result. Her comments were quickly rounded on by her political opponents as "out of touch."