Foreign Secretary William Hague outlined a hardening UK position on settlement building when he met his Israeli counterpart Avigdor Lieberman in London this week.

In talks which focused on the peace process, he stressed that the current impasse did not serve the interests of Israelis, Palestinians or the region.

A Foreign Office statement said: "The Foreign Secretary made clear again the government's view that the construction of settlements is illegal, an obstacle to peace, and should stop.

"He underlined the need for Israel and the Palestinian Authority to find a way back to negotiations as soon as possible to reach a lasting two state solution."

A source said that while the meeting was warm and the bi-lateral relationship strong, Mr Hague felt it was important to deliver "frank messages where frank messages are required".

In a robust response, Mr Lieberman said: "The main problem of the Middle East is not the settlements, but rather extremism of radical Islamic elements who threaten the stability of the region.

"The real threat on the leadership of the Palestinian Authority is not Israel, but Hamas and [Islamic] Jihad."

Following an hour-long meeting on Monday, the Foreign Secretary gave Mr Lieberman a tour of the Cabinet War Rooms. Mr Lieberman said: "Every leader today must ask himself how Churchill would have dealt with the Iranian problem and to take action with this role model in mind."

He also met the government's National Security Adviser, Sir Peter Ricketts, and members of the Foreign Affairs Select Committee.

Despite the criticism of continued settlement building, Mr Hague emphasised the strength of the relationship with Israel and reiterated the UK government's opposition to attempts to question the legitimacy of Israel.

The two men confirmed that the next meeting of the UK-Israel Strategic Dialogue would take place in Jerusalem on March 17.