Prime Minister Andy Burnham is poised to impose a ban on trade with Israeli settlements in the occupied West Bank as his Government prepares a wider response to continued settlement expansion.
The proposed move would mark a significant escalation in Britain's policy towards the Israeli Government and would go beyond current UK rules, which strongly advise businesses against economic activity in settlements but do not prohibit it.
Reports suggest a trade embargo could be announced within weeks as part of a package responding to Israel's E1 settlement project. The Government has not yet formally announced a final trade ban, so the measure remains a reported proposal rather than enacted policy.
However, ministers have publicly confirmed that further measures on settlement trade are under active consideration, while Foreign Secretary Ed Miliband has promised a comprehensive response to the E1 plans in the coming weeks.
Burnham moves towards settlement trade ban
Burnham has previously said Britain should examine measures to ban trade in goods with Israeli settlements, arguing that greater pressure is needed on the Israeli Government over settlement expansion and settler violence.
The Government's position has since hardened further. Ministers have told Parliament that they are actively considering additional measures affecting trade in goods and services with settlements.
Current UK policy maintains a distinction between Israel within its pre-1967 borders and Israeli settlements in occupied Palestinian territory.
The Government says those settlements are illegal under international law, a position disputed by the Israeli Government.
Current rules advise against trade but do not ban it
House of Commons Library analysis confirms that Britain does not currently impose a legal prohibition on trade with Israeli settlements.
Government business guidance instead strongly advises British citizens and companies against conducting economic and financial activities in settlements, including investments, purchases, procurement and certain services.
Goods produced in settlements are not entitled to preferential tariff treatment available under Britain's trade arrangements with Israel.
HM Revenue and Customs can conduct checks where there are doubts about the declared origin of goods.
E1 expansion triggers tougher British response
The latest move follows Israel's publication of a tender for the E1 settlement project in the West Bank.
Miliband condemned the project on 19 August as unacceptable and destructive, summoned Israel's Chargé d'Affaires and demanded that the Israeli Government retract the tender and halt settlement expansion.
He also announced that Britain would set out a comprehensive package of measures in the coming weeks aimed at responding to Israeli Government policies and targeting those involved in illegal settlement expansion.
Burnham subsequently joined international leaders in warning that E1 would damage the territorial continuity of a future Palestinian state and undermine prospects for a two-state solution.
Government examining how a ban could work
A trade prohibition would raise practical questions over identifying the true origin of goods and distinguishing settlement trade from legitimate commerce with businesses elsewhere in Israel.
During a Commons debate in July, ministers acknowledged that establishing a properly verifiable system for determining the source of products was one of the challenges involved in banning settlement imports.
The Government has stressed that any measures should target settlements while preserving legitimate UK trade with Israel.
The precise legal mechanism, scope and enforcement arrangements for a potential ban have not yet been formally published.
Labour MPs have pushed Burnham to act
Pressure for tougher measures has been building inside Labour.
Around 140 Labour MPs wrote to ministers earlier this summer calling for a ban on trade with Israeli settlements, arguing that stronger consequences were needed in response to developments in the occupied West Bank and East Jerusalem.
A Commons debate on the potential merits of a settlement trade ban was subsequently held in July.
The Liberal Democrats and a number of civil society organisations have also advocated legislation prohibiting settlement trade.
Critics warn of wider economic consequences
The proposal is likely to face opposition from pro-Israel groups and some Labour figures who argue that separating settlement-linked goods and services from wider Israeli commerce could prove difficult in practice.
Fresh reporting has also raised concerns that a British trade ban could create tensions with the United States, where federal and state-level anti-boycott rules may complicate compliance for American companies.
Those warnings remain assessments of the potential consequences rather than evidence that Washington has decided to retaliate against Britain.
The Government's stated objective is to distinguish between settlement activity and legitimate trade with Israel rather than impose a general boycott of the Israeli economy.
Final decision has not yet been formally announced
Although the direction of Government policy is increasingly clear, Downing Street has not yet published legislation or formally confirmed that a complete settlement trade ban has received final approval.
The verified position is that ministers are considering further measures on settlement trade, Burnham has previously backed examining a ban, and the Foreign Secretary has promised a comprehensive response to E1 within weeks.
Any eventual announcement will therefore determine whether the measure covers goods alone or extends to services and financial activity, how settlement origin will be verified and when the restrictions would come into force.