The US State Department has called Israeli plans to build further settlements in East Jerusalem “especially damaging”, and the White House has urged Israel to “reconsider”.

The Israeli Ambassador to the UK, Daniel Taub, was formally summoned to the Foreign Office on Monday and told that the UK was “disappointed” by Israel’s decision to plan new homes in the settlements in the West Bank.

Government sources have told Sky News that Britain has threatened to "revisit" EU trade agreements with Israel in the wake of Israel’s warning that it may build 3,000 new settlement homes east of Jerusalem.

Israel’s warning comes following the UN vote last week to upgrade the Palestinian Authority from ‘entity’ to ‘non-member observer’ status.

The Israeli cabinet will ask re-elected US President Barack Obama to refuse the Palestinian request for a diplomatic UN upgrade.

Palestinian Authority President Mahmoud Abbas is scheduled to address the United Nations General Assembly at the end of the month. Sources say he will ask the UN to upgrade Palestinian status to that of permanent observer-state.

Twenty-two organisations, including Christian Aid, The Methodist Church of England and the Church of Sweden, have released a report recommending that the EU stops importing goods made in Israeli settlements.

The UN official who posted an antisemitic cartoon on his personal blog last year has urged the international community to boycott companies with links to settlements.

The US, the UK and Israel have criticised UN Special Rapporteur Richard Falk over the boycott call, with the US envoy to the UN stating that such action would not further the progress of a peace deal.