The loss of the London-based European Medicines Agency (EMA) and European Banking Authority (EBA) became inevitable after Britain voted to leave the EU because both are intrinsically linked to the single market.
But the decision to move so quickly after Theresa May began divorce proceeding by invoking Article 50 is seen by many as a sign of the uncompromising position being taken by EU diplomats.
A number of capital cities are lining up to welcome both agencies and EU Council president Donald Tusk is expected to unveil the selection criteria within the next two weeks.
However realistic the threats were – or not – they were noticed
The EMA and EBA each employ about 1,000 people, many of them British, and provide a hub for businesses in the UK.
The EU’s chief negotiator hopes the agencies will know their new locations by June, although the process may take longer.
Cities such as Dublin, Frankfurt, Milan, Amsterdam, Paris and Stockholm all want to play host to the agencies which are considered as among the EU’s crown jewels.
It has also emerged that Britain has failed convince any of the remaining 27 member states that trade talks should get under way early.
Diplomats agreed with the European Commission’s decision to block any talks about a future comprehensive trade deal until the UK accepts its £60bn divorce bill and comes to a settlement on the rights of EU citizens.
Mrs May hoped hardline European council guidelines ruling out a trade deal within two years would have been toned during consultation with the member states.
But EU sources claimed Britain’s aggressive approach to the talks, including threats of becoming a low-tax, low-regulation state unless it was given a good deal, had backfired.
One Brussels insider told the Observer: “However realistic the threats were – or not – they were noticed.
“The future prosperity of the single market was challenged. That had an impact – it pushed people together.”
Another senior diplomat said any initial sympathy with Britain had fallen away in many capitals, because of the Goverment’s approach.
He said: “Of course, we want to protect trade with Britain, but maintaining the single market, keeping trade flowing there, is the priority, and so we will work through Michel Barnier.
“Britain used to be pragmatic. That doesn’t seem to be the case any more and we need to protect our interests.”