Foreign Secretary William Hague said Britain is unfreezing 91 million pounds ($150 million) of Libyan oil assets to help the National Transitional Council, which the U.K. now recognizes as "the sole governmental authority in Libya."
He said the council had been invited to send an ambassador to London, adding that "we will deal with the National Transitional Council on the same basis as other governments around the world."
The Libyan charge d'affaires was summoned Wednesday morning and informed that all eight remaining staff and their dependents must leave the country within three days, the Foreign Office said.
Britain's diplomatic moves implement a decision made at a July 15 meeting in Istanbul during which the United States, Britain and 30 other nations recognized Libya's main opposition group as the country's legitimate government
A popular uprising seeking to oust Gadhafi broke out in February, but the front lines in the civil war have remained largely stagnant since then. Rebels, backed by NATO air bombings, control much of the country's east and pockets in the west. But Gadhafi controls the rest from his stronghold in Tripoli, the capital.
Britain is one of he leading participants in the NATO campaign, but the government has been under pressure over its failure to remove Gadhafi from power.
This week Hague said for the first time that Gadhafi might be able to remain in Libya, as long as he is not in power.
He said that "Gadhafi is going to have to abandon power, all military and civil responsibility," but "what happens to Gadhafi is ultimately a question for the Libyans."
France and the United States have made similar suggestions.
Hague denied there was a stalemate in Libya.
"We will see this through to success, however long it takes," he said. "Time is not on the side of the Gadhafi regime."