The British government believes it has found a way to punish Israel. It may soon discover that the people paying the highest price are not Israelis at all, but Palestinians and British businesses.
It may also discover that attempting to pressure an Israeli government in the middle of an election can produce political consequences very different from those intended.
Let us start with an uncomfortable economic reality. The volume of goods exported from Israeli West Bank communities to the UK is tiny in the context of Israel’s economy. The measures announced by the British government may make for dramatic headlines, but they are unlikely to inflict meaningful damage on an Israeli economy increasingly oriented towards technology, defence, innovation and global markets.
Whatever one’s political view of settlements, though, there is an economic fact that cannot simply be wished away: Palestinian families depend on employment connected to the Israeli economy.
Before the Gaza war, approximately 25,000 Palestinians were employed in Israeli settlements, according to the Palestinian Central Bureau of Statistics. The International Labour Organization found that wages earned by Palestinians working in Israel and the settlements were more than twice those available in Palestinian companies and almost five times those in Gaza.
In the third quarter of 2023 alone, Palestinian workers in Israel and the settlements earned approximately $880 million, equivalent to almost 20 per cent of Palestinian GDP for that quarter.
We have subsequently seen what happens when those economic connections disappear. The World Bank found that Palestinian labour compensation from employment in Israel collapsed from $4.3 billion in 2022 to only $532 million in 2024. The loss of that income placed a heavy burden on the wider Palestinian economy.
That should be setting off alarm bells in London. If Britain makes Israeli businesses in the West Bank commercially toxic, companies may stop buying from them, withdraw services or investment, or force businesses to shrink, relocate or close.
And when that happens, who loses their job? The Palestinian worker does not receive a cheque from Ed Miliband.
We have already seen a version of this movie. For years, the BDS movement targeted SodaStream because its factory operated in Mishor Adumim. When the company later relocated to southern Israel, activists celebrated. Whatever caused the move, the consequences for its Palestinian employees were clear: hundreds ultimately lost their jobs.
That is the contradiction at the heart of Britain’s policy. A measure supposedly designed to improve Palestinian prospects risks damaging precisely the economic relationships that provide Palestinian families with some of their best-paid employment.
Remarkably, the British government itself has acknowledged the problem. Earlier this year, while considering how a settlement trade ban might work, it noted the interconnected economies of Israelis and Palestinians and the difficulty of protecting legitimate trade with both.
British businesses, meanwhile, should be asking another question: what happens to us?
On the day Britain announced its measures, US Ambassador to Israel Mike Huckabee warned that UK companies could face consequences under American state anti-boycott laws, specifically mentioning Florida.
The details vary from state to state, but the principle is straightforward. A number of US states restrict public contracts or investment involving companies boycotting Israel, including the West Bank.
British companies may now need legal advice simply to determine whether compliance with one government’s policy exposes them to commercial consequences in another jurisdiction.
UK Lawyers for Israel has raised a separate challenge, arguing that a blanket trade ban could conflict with Britain’s obligations under the UK-Israel Trade and Partnership Agreement and international trade rules.
Labour presents its policy as an assertion of international law. Its critics argue that implementing it may itself create competing legal obligations.
But the risks are not only economic or legal. Britain says its measures are directed against the policies of the current Israeli government. But imposing them during an election campaign inevitably makes them part of Israeli politics.
President Isaac Herzog, hardly a spokesman for Benjamin Netanyahu, has called the British move “gross interference in the democratic elections of a sovereign nation”. Opposition leader Yair Lapid called the decision “severe and misguided” and Benny Gantz called Britain’s decision “hypocrisy”.
I am not making this argument to defend Benjamin Netanyahu. I resigned from this government and founded Israel First because I believe Israel’s political system needs change. But whatever change Israelis choose must be chosen by Israelis.
Politically, Britain risks handing Netanyahu an argument his opponents never wanted him to have. He can tell voters that whatever disagreements they may have with him, foreign governments are trying to pressure Israel weeks before they choose their next government.
There is another irony. Britain’s attempt to increase its influence over Israeli policy has already begun to reduce its influence on the ground. Israel has responded by ordering the closure of the British consulate in East Jerusalem, removing Britain from a US-led coordination mission relating to Gaza and ending British training of Palestinian security forces in the West Bank.
Britain has not increased its leverage; it has begun spending it.
If the British government genuinely wants to improve Palestinian prosperity and create the conditions for peace, it should be encouraging economic cooperation between Israelis and Palestinians, not dismantling it. Peace will ultimately require Israelis and Palestinians to build things together, trade together and create prosperity together. A boycott does the opposite.
Britain may believe it is punishing Israel. It may instead hurt Palestinian workers, expose British companies to unnecessary risk, diminish its own influence and strengthen the very political forces it hoped to pressure.
In the end, Israel’s future will be decided in Israel. And when Israelis make that choice, there is only one interest that must come first: Israel’s.
Sharren Haskel is a former Deputy Foreign Minister of Israel
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