Citing unnamed anti-terrorism chiefs, the newspaper said that al Qaeda had regrouped and recovered its organisation in a South Asian country, despite a more-than-four-year campaign by a US-led coalition to wipe out the network.
In that time, the newspaper reported, the terror organisation has become a more coherent network with a regular supply of volunteers.
Extremists "viewed 77 (the July 7, 2005 suicide attacks on London's transport network) as just the beginning," an unnamed senior source said.
"Al Qaeda sees the UK as a massive opportunity to cause loss of life and embarrassment to the authorities," the source continued.
Meanwhile, another unnamed source told the daily: "Britain is sitting at the receiving end of an al Qaeda campaign."
Britain is seen as an easier threat for al Qaeda than many other countries because of its historic links with the South Asian nation, with tens of thousands of travellers between the two countries each year, the newspaper reported.
The structure of the terror network has also changed, anti-terror chiefs claim, to a more hierarchical system with greater organisation and inter-linkage, from a threat that was mainly comprised of small groups which shared the same philosophy but were largely self-taught and lacked structure.
"There is a hierarchy within each cell with a very tightly run command and control," an unnamed counter-terrorism source said.
"It's all about building up these recruits to consider themselves as 'patriots' and encouraging them to make the leap and ask themselves 'This is how the west treats Muslims, what are we going to do about it?'", another unnamed source told The Guardian.

Copyright AFP (Agence France-Presse), 2006