Britain is preparing a major reset of its policy towards Israel after the Israeli government advanced plans for the controversial E1 settlement project in the occupied West Bank. Foreign Secretary Ed Miliband has said the UK will introduce a “comprehensive” package of measures in the coming weeks, including sanctions against people involved in illegal settlement expansion. The announcement marks a significant hardening of London’s approach and comes as European governments intensify pressure on Israel over settlement construction and settler violence.
Why is Britain changing its policy towards Israel?
The immediate trigger is Israel’s decision to publish tenders for construction in the E1 area, east of Jerusalem. Britain has long opposed development there because of its potential impact on the territorial continuity of a future Palestinian state.
On 19 August, Miliband condemned the tender as an “unacceptable and destructive act” and said the UK would not accept moves that threaten the two-state solution. He also summoned Israel’s chargé d’affaires to the Foreign, Commonwealth and Development Office to formally communicate Britain’s objections.
The British government’s response is being framed as part of a wider reassessment rather than a reaction to a single planning decision. Miliband said the forthcoming measures would respond to Israeli government policies, protect the viability of a Palestinian state and target those involved in settlement expansion.
That suggests London is considering a broader set of diplomatic and economic tools than the measures already introduced against individuals associated with settler violence.
What is the E1 settlement project and why does it matter?
The E1 area lies east of Jerusalem and connects the city with the large Israeli settlement of Ma’ale Adumim. Development there has long been regarded internationally as particularly sensitive because a substantial settlement corridor could make movement between the northern and southern parts of the West Bank more difficult.
The UK says E1 risks separating the West Bank from East Jerusalem and damaging the territorial basis required for a viable Palestinian state. Britain has opposed the project for years. In 2025, the government warned that the plan involved more than 3,000 potential homes and could divide a future Palestinian state.
Israel has now moved further by opening tenders for about 1,200 homes in the area, according to reports. Israel has also approved more than 3,400 housing units associated with the wider E1 development.
For London, the issue is therefore not simply new housing construction. It is linked to the wider question of whether a negotiated two-state settlement remains geographically and politically possible.
What measures could the UK introduce?
The precise package has not yet been announced. However, the government has explicitly said it intends to target sanctions at people participating in illegal settlement expansion.
Possible measures could include additional financial sanctions against individuals or organisations connected with settlement activity, restrictions on economic dealings and stronger guidance for British businesses. A potential ban on trade in goods from Israeli settlements has also been under discussion in British politics.
The UK has already taken steps in this direction. In June, Britain coordinated sanctions with Australia, Canada, France, New Zealand and Norway against networks accused of financing or enabling settler violence in the West Bank. The government also advised British businesses against economic and financial activity in illegal settlements.
A wider trade restriction would represent a more consequential step, particularly if it covered services as well as physical goods.
How have Israel and other countries responded?
Israel has rejected Britain’s criticism. Foreign Minister Gideon Sa’ar accused Miliband of adopting a “patronising” and one-sided approach, reflecting the sharp deterioration in diplomatic rhetoric between the two governments.
The dispute is unfolding against a wider international campaign over the E1 project. Britain joined France, Germany, Italy, the Netherlands, Canada, Norway, Australia, New Zealand and other governments in a joint statement describing the settlement plans as unacceptable and warning that they could undermine the two-state solution.
The coordinated position is significant because the UK is not acting entirely alone. European governments have increasingly linked settlement expansion with the broader deterioration of conditions in the West Bank, including rising settler violence and restrictions affecting Palestinian communities.
What are experts saying about the proposed UK reset?
Supporters of stronger measures argue that repeated diplomatic warnings have not stopped settlement expansion and that economic consequences are needed if Britain wants its position to carry greater weight.
Sarah Sanbar, acting Israel-Palestine researcher at Human Rights Watch, welcomed potential UK action against trade with settlements, according to Al Jazeera. The organisation has argued that meaningful measures could help reinforce international opposition to settlement activity.
Other voices have warned that tougher economic measures could create diplomatic and commercial complications. Critics within the UK have raised concerns about distinguishing settlement-produced goods from products originating elsewhere in Israel and about the potential impact on British-Israeli commercial relations.
The United States is also closely watching the proposed British measures. Reports indicate that Washington has concerns about foreign sanctions or boycotts affecting Israel and the potential implications for American businesses operating in Britain.
How does the policy fit into Britain’s wider position on Palestine?
The proposed reset follows a broader evolution in British policy. In September 2025, the UK formally recognised the State of Palestine, saying the decision was intended to protect the viability of a two-state solution and create a route towards lasting peace.
Britain has also continued to distinguish between Israel itself and Israeli settlements in territory occupied since 1967. Parliamentary guidance notes that settlement goods do not qualify for preferential treatment under the UK-Israel Trade and Partnership Agreement, while British policy supports accurate labelling of such products.
The latest announcement therefore represents an escalation of an existing direction rather than an entirely new policy. What is different is the possibility of more substantial economic and diplomatic consequences.
What happens next for UK-Israel relations?
The government is expected to set out the details of its package in the coming weeks. The central question will be whether Britain restricts itself to targeted sanctions or moves towards broader measures affecting trade with Israeli settlements.
Any action will have to balance several competing objectives: supporting Palestinian statehood, maintaining pressure on Israel, protecting British commercial interests and avoiding unnecessary damage to wider diplomatic and security cooperation.
The decision will also test how closely Britain can coordinate with European and other international partners. The joint condemnation of E1 suggests there is already considerable diplomatic alignment, but governments remain divided over how far economic pressure should go.
For Israel, the measures could add to growing diplomatic pressure over settlement expansion. For Britain, they will provide a test of whether its increasingly forceful language can translate into policies capable of influencing events on the ground.
The next announcement will therefore be closely watched. The scale and enforcement of the UK’s proposed measures could determine whether the promised policy reset becomes a substantive change in Britain’s approach to Israel or remains primarily a diplomatic warning.
