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UK trade with Israeli settlements in the Occupied Palestinian Territories: Government statements and guidance in 2026

The debate was scheduled by the Backbench Business Committee (PDF) and will be led by Abtisam Mohamed (Labour).

On 9 June 2026, the government announced various measures it would take in response to the situation in the Middle East, including ongoing circumstances in Gaza and the West Bank, as well as wider conflict involving Israel, Iran and Hezbollah. However, some MPs have requested the government go further and introduce a legal ban on trade with Israeli settlements in the occupied West Bank. This briefing sets out current UK trade guidance, the status of UK trade with the settlements and debate in the UK Parliament.

Terminology: Israel and the Occupied Palestinian Territories

In September 2025, the UK Government recognised the state of Palestine, with provisional borders covering lands occupied by Israel in the 1967 conflict. Final borders remain subject to agreement and equal land swaps between Palestinians and Israelis.

The UK Government considers that Israel’s degree of control over Gaza, the West Bank and East Jerusalem “amounts to occupation under international law”, in line with UN Security Council resolutions and the International of Court of Justice (ICJ; the UN’s highest court). Given the contested nature of Palestinian statehood during the period covered here and the assessment of occupation, this briefing uses the term “Occupied Palestinian Territories” to describe Gaza, the West Bank and East Jerusalem.

UK Government position on Israeli settlements in the occupied West Bank

Successive UK governments have said that Israeli settlements in the occupied West Bank are illegal under international law. The government set out this position in its October 2025 response to the Foreign Affairs Committee’s inquiry on the Israeli–Palestinian conflict: 

The UK Government has a clear position that Israeli settlements in the Occupied Palestinian Territories are illegal under international law. Goods originating from illegal Israeli settlements are not entitled to tariff and trade preferences under either the existing agreement between the UK and Israel, or in our agreement with the PA [Palestinian Authority, which governs in the West Bank; response to committee recommendation 12]. 

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We agree that settlements are illegal and that Israel must cease all settlement activities immediately; that we must distinguish in everything we do between Israel within its 1967 borders [when Israel captured East Jerusalem, Gaza and the West Bank], and illegal settlements in what is Occupied Palestinian Territory; and that Israel must bring an end to its presence in the Occupied Palestinian Territories as rapidly as possible [response to committee recommendation 13].

In 2016, the UK voted in favour of a binding UN Security Council resolution, UNSC 2334 (2016) (PDF), which said that settlements established by Israel in the Occupied Palestinian Territories have “no legal validity and constitutes a flagrant violation under international law”:

1. Reaffirms that the establishment by Israel ofsettlementsin the Palestinian territory occupied since 1967, including East Jerusalem [referring also to the West Bank and Gaza], has no legal validity and constitutes a flagrant violation under international law and a major obstacle to the achievement of the two-State solution and a just, lasting and comprehensive peace;

2. Reiterates its demand that Israel immediately and completely cease all settlement activitiesin the occupied Palestinian territory, including East Jerusalem, and that it fully respect all of its legal obligations in this regard;

3. Underlines that it will not recognize any changes to the 4 June 1967 lines, including with regard to Jerusalem, other than those agreed by the parties through negotiations;

4. Stresses that the cessation of all Israeli settlement activities is essential for salvaging the two-State solution, and calls for affirmative steps to be taken immediately to reverse thenegative trends on the ground that are imperilling the two-State solution.

In 2024, the UN's highest court, the International Court of Justice, said in a non-binding advisory opinion (PDF) that “the State of Israel is under an obligation to cease immediately all new settlement activities, and to evacuate all settlers from the Occupied Palestinian Territory” (paragraph 284).

It also said it “considers that the duty of distinguishing dealings with Israel between its own territory and the Occupied Palestinian Territory” (PDF) means that states should not enter any economic deals with Israel “concerning the Occupied Palestinian Territory”:

abstain from entering into economic or trade dealings with Israel concerning the Occupied Palestinian Territory or parts thereof which may entrench its unlawful presence in the territory… and to take steps to prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel in the Occupied Palestinian Territory [paragraph 278]

In 2025, the UK Government said it was continuing “to consider the Court's Advisory Opinion carefully”, and noted that “many” aspects of the advisory opinion “are already government policy and align with the UK’s views that the Israeli occupation of Palestine is illegal.”

The Israeli Government has rejected the ICJ advisory opinion. In July 2024, the Israeli Prime Minister, Benjamin Nentayhu, said that the “legality of Israeli settlement in all the territories of our homeland cannot be contested”. The Israeli Government has also said the future of settlements is a “permanent status” issue, and that settlements will be discussed in a final agreement with Palestinian Authority under the 1990s Oslo Accords, alongside others such as the status of Jerusalem and border:

it is specifically provided that the issue of settlements is reserved for permanent status negotiations, reflecting the understanding of both sides that this issue can only be resolved alongside other permanent status issues, such as borders and security.  Indeed, the parties expressly agreed - in the Israeli-Palestinian Interim Agreement on 1995 [Oslo 2]- that the Palestinian Authority has no jurisdiction or control over settlements or Israelis and that the settlements are subject to exclusive Israeli jurisdiction pending the conclusion of a permanent status agreement.

UK trade with Israel and the Occupied Palestinian Territories

The UK has a free trade agreement with Israel, with the current deal coming into effect in January 2021 to replace previous trade agreements the UK enjoyed as a member of the EU. In 2022, negotiations to update this agreement were launched. In May 2025, the government announced that it was suspending these negotiations in response to Israeli actions in Gaza. In June 2026, The Business and Trade Secretary, Peter Kyle, said that the government currently has no plans to restart these negotiations.

The UK also has an interim political, trade and partnership agreement with the Palestinian Authority.

Goods produced in the Israeli settlements are not entitled to benefit from preferential tariff treatment under either of the UK’s trade agreements with the Palestinian Authority and the Government of Israel. For goods to claim preferential tariffs, their documentation must detail where they were produced and show they were not produced “in a location within the territories brought under Israeli administration since June 1967”. Where there are doubts about the declared origin of goods, HM Revenue and Customs undertakes checks to verify it.

In addition, the UK Government has introduced guidelines outlining how products originating from the territories occupied by Israel since 1967 should be specifically labelled as such so they do not mislead consumers.

However, there have been concerns reported about goods originating in the Occupied Palestinian Territories being mislabelled as originating in Israel.

It is difficult to obtain accurate figures for UK trade with the Occupied Palestinian Territories (because they are in a customs union with Israel), or Israeli settlements. Nevertheless, the government estimates that UK–OPT trade was worth around £38 million in 2025, while UK–Israel trade was worth around £6 billion in the same period.

Calls to ban trade with Israeli settlements

In June 2026, around 140 Labour MPs wrote to the Foreign Secretary calling on the government to ban trade with Israeli settlements in the West Bank. The letter said there was “an urgent need for accountability and concrete consequences in response to Israel’s violations against Palestinians in the occupied West Bank and East Jerusalem”.

The Liberal Democrats have also called for the government to introduce legislation to prohibit trade in goods and services between the UK and Israeli settlements. In June 2026, Layla Moran MP presented a bill to the Commons which aimed to prohibit trade with the Israeli settlements. 

In a July 2025 report, the Foreign Affairs Committee called on the government to “take immediate steps to prepare a comprehensive ban on the import of goods from the illegal settlements in the West Bank.”

Civil society groups, such as Human Rights Watch, have called for a trade ban with the Israeli settlements.

UK Government position on a trade ban

The UK Government has issued sanctions against some Israeli individuals and organisations and its business risk guidance “strongly advises against” trade with “illegal Israeli settlements”. However, it does not ban trade with these settlements.

Recent UK Government statements and actions on UK–Israel trade

In September 2024, during the Israel–Hamas conflict of 2023 to 2025, the UK Government announced that it was suspending some UK arms export licences to Israel. In May 2025, it announced a pause on free trade talks with Israel and a review of the 2023 roadmap on Israel–UK relations.

For more information on the suspension of free trade talks and UK sanctions, see sections 3.3 and 3.4 of the Commons Library briefing, Israel and the Occupied Palestinian Territories in 2025: UK and international response. In response to Israeli settler violence in the occupied West Bank, the government has also issued sanctions against Israeli individuals and organisations (most recently in May and June 2026), as well as against two Israeli ministers (in their personal capacity) “for inciting violence against Palestinians in the West Bank”.

In joint statements with international partners, the UK has also criticised the E1 settlement plan in the West Bank, and said that, if implemented, the E1 plan would “divide the West Bank in two and mark a serious breach of international law”. In May 2026, the government said that “businesses should not bid for construction tenders for E1 or other settlement developments”.

For information on the E1 plan, see pages 53 to 54 of the Commons Library briefing on Israel and the Occupied Palestinian Territories in 2025.

Announcement of further UK Government measures, June 2026

In June 2026, the government announced tougher UK action in response to settlement expansion and rising settler violence in the West Bank. The announcement included updates to the UK’s official guidance, which continued to support trade with Israel within 1967 lines but now explicitly advises businesses against economic and financial activity in illegal settlements.

On 9 June 2026, the Foreign Secretary, Yvette Coooper, made a statement on the Middle East in the House of Commons announcing that the government had “strengthened” its business risk guidance on trade with illegal Israeli settlements:

On 22 May, the Prime Minister led a group of other world leaders in warning businesses not to bid for construction tenders for E1 or other settlement developments. However, this is not just about construction contracts, so today, alongside the Department for Business and Trade, I have strengthened our business risk guidance to make it clear and unambiguous that British citizens and businesses should not conduct any economic or financial activities in illegal Israeli settlements.

She added that the UK “must continue to distinguish and protect trade with people and businesses across the state of Israel”:

We believe that settlements are a fundamental barrier to peace and a flagrant breach of international law, and that violent settler groups should not be profiting from the land they have seized from Palestinians. We also believe that we must continue to distinguish and protect trade with people and businesses across the state of Israel, trade that reflects long-standing and important ties between our countries and communities. We will continue to co-ordinate our approach with close allies and look at further concrete steps to counter settlement expansion and promote peace and security.

The government’s updated guidance on the business risks of trading with Israeli settlements says “we strongly advise against conducting any economic and financial activities in illegal Israeli settlements”. It says that businesses are strongly advised against several activities:

Businesses should not engage in economic and financial activities in Israeli settlements. Economic and financial activities we strongly advise against conducting include: financial transactions, investments, purchases, procurements as well as other economic activities (including services like tourism) in Israeli settlements or directly benefiting Israeli settlements. Legal and economic risks stem from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognised as a legitimate part of Israel’s territory. This may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment.

The government’s guidance previously said that it “does not encourage or offer support to such activity”, arguing that trade could have legal and reputational implications and that some transactions (listed in the 2026 guidance) “entail legal and economic risks”. It also said that “UK citizens and business should be aware of the potential reputational implications of getting involved in economic and financial activities in settlement”.

In response to calls to explicitly ban trade with the settlements, the Foreign Secretary said that the government had “made it very clear that we do not believe there should be trade with the illegal settlements”:

… we have made it very clear that we do not believe there should be trade with the illegal settlements. We have given clear and extremely strong advice, and we will continue to work with allies across the world on the most effective way to maintain this. It is also important that we differentiate between trade with illegal settlements and trade with businesses and organisations across Israel.

Asked why the government did not ban trade with the settlements, the Foreign Secretary said that “international coalition and consensus” made the “biggest impact”:

individual countries can take particular action on things such as sanctions in different ways—the trade issues we have discussed and so on—but the biggest impact will be made by building an international coalition and consensus.

The government also announced sanctions on six entities and one individual. This was part of coordinated action alongside Australia, Canada, France, New Zealand and Norway.

According to the Guardian, the government’s announcement did not go far enough for many Labour MPs who supported a trade ban. The newspaper reported that the UK Government guidance “does not amount to a ban or impose any penalty for noncompliance.”

Response to urgent question on expanding settlements, July 2026

In answer to an urgent question on Israel: E1 Zone Expansion, the Middle East Minister, Hamish Falconer, said that the UK was discussing with its partners “how a ban on settlement trade might work”:

We are in discussion with partners, including those few countries who have explored how a ban on settlement trade might work. We are looking at further concrete steps to counter settlement expansion and promote peace and security. It is only through a negotiated two-state solution, not unilateral action, that a viable path to long-term peace can be achieved. That path must guarantee security to Israelis and Palestinians alike.

The minister said these discussions with other countries had revealed “a number of technical difficulties”. In a 2 June letter to the Chair of the Business and Trade Committee, the government said these challenges include “the interconnected economies of Palestine and Israel, and the importance of distinguishing and protecting legitimate trade with both states.”

Approaches taken in other countries

Countries taking steps to ban trade with Israeli settlements include:

• Spain, which issued regulations in September 2025
• Ireland, which proposed bills in 2018 and 2025
• Norway, which proposed legislation in 2026
• the Netherlands, which implemented a ban on goods in 2026

Several EU countries have previously called for EU-wide action. The EU’s High Commissioner for Foreign Affairs, Kaja Kallas, said in June 2026 that the issue of a ban would be considered by EU leaders. In June 2025, the European Council on Foreign Relations published an article analysing the EU deliberations.