It is the UK, no territorial sovereignty is ceded to an embassy whatsoever, its confusing who owns the territory over who is permitted to control what goes on.
The vienna conventions, which the UK is signed up to, allow embassies and embassy staff to be temporarily excluded from certain laws and regulations.
Notably, the convention says that the host country cannot enter the embassy without the permission of the ambassador/ consul (can't remember which).
So, the UK retains ownership of the territory in all cases, but in some cases permits, through an act of parliament, the ambassador to control what goes on.
The law as it stands here is that any member of the embassy staff, the ambassador, and the embassy itself, can have its status revoked with notice can cause. This is what the home secretary threatened at the time, but backed down when they realised it would be far more productive to simply let him stew.
it does illuminate the sovereignty question though that this is possible.