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Lord Austin of Dudley
To ask His Majesty’s Government what assessment they have made of the contribution that trade with Israel makes to the United Kingdom economy.
Lord Austin of Dudley (Non-Afl)
My Lords, I draw attention to my role as the UK’s trade envoy to Israel.
I start by welcoming the Minister and thank all noble Lords—especially the noble Baroness—who are here to discuss the contribution that trade with Israel makes to the UK, the businesses it supports, the jobs it creates and how many thousands of people are better off as a result of trade with our closest ally in the Middle East. The argument I want to make is that increasing trade with and attracting investment from Israel will help the Government achieve their most important objectives by improving growth and delivering their industrial strategy.
I pay tribute to the brilliant team at our embassy in Tel Aviv, led by His Majesty’s Ambassador Simon Walters CMG, the Trade Director Debbie Shapiro and all their colleagues, who work so hard to encourage British companies to export to Israel and Israelis to invest here in the UK. I am sure that the Minister will join me in thanking the officials in his department who promote trade with Israel and support my work in the trade envoy team.
Before the conflict, trade between Israel and the UK was at an all-time high—and our relationship stronger than ever before—in trade and investment, technology and innovation, defence and security, and health and education. Over the past five years, more than 300 Israeli companies have expanded into the UK, generating 4,000 jobs and almost £1 billion in investment. Israeli investment created 871 jobs and contributed £173 million to the UK economy in the last year alone, as trade increased again, despite the Gaza war and campaigns to boycott Israel.
Official figures from the Department for Business and Trade showed that total trade amounted to £6.2 billion in the year to June last year. This represented a 3.2%—or £218 million—increase driven by a surge of financial services exports to Israel. Given the overall balance of UK trade around the world, it is particularly important to note that more than half of the trade with Israel is in British exports, which accounted for much of that, increasing by 10.5%. We export clothes and cars, power generators and aircraft engines, medical equipment, scientific instruments and pharmaceutical products—and Scotch whisky exports are up 300%.
I am sure that the Minister will join me in welcoming that increase, and so will he set out the UK’s current trade policy with Israel and what more the Government are doing to encourage exports to and investment from Israel? Does he have any plans to visit Israel to see all this at first hand, to meet UK companies working there, to encourage exports and to encourage Israelis to invest here?
Israel supplies one in seven NHS prescriptions, which save the health service nearly £3 billion every year. It is a global leader in digital health, biotech and medical innovation, delivering cutting-edge breakthroughs in early cancer detection, gene editing, Alzheimer’s research and cardiovascular treatment. The UK-Israel Health-Tech Academy was launched in 2024 by the UK-Israel Tech Hub, which is based in our embassy in Tel Aviv, to bring Israeli health breakthroughs to benefit UK patients. Supported by the Dangoor Education foundation, the academy educates cutting-edge start-ups in Israel on the UK healthcare system and enables medical technology trials with NHS partners. The result of that is Israeli start-ups conducting research and spending R&D capital with the NHS to enable patients in the UK to benefit from ground-breaking Israeli healthcare developments and technologies.
Established by the British Council, our embassy and the Pears Foundation, BIRAX—the Britain Israel Research and Academic Exchange—is the flagship UK-Israel research partnership, which has invested £15 million in 32 collaborative projects to tackle huge challenges such as debilitating diseases, regenerative medicine and healthy ageing. Led by Ravit Capauner, it funds university partnerships to bring academic researchers in Israel and the UK together to strengthen innovation and scientific research. It uses cutting-edge technologies in AI, big data, life sciences and personalised medicine to tackle NHS priorities in dementia, multimorbidity, women’s health and mental health, to help people live longer, healthier and more independent lives. It contributes to economic growth in the UK by creating hundreds of jobs in scientific research and leveraging other funding to generate much greater economic benefits for the UK.
Israel is also a key defence and security partner. It is the third-largest supplier of arms to the UK, and Israeli military equipment has saved the lives of British forces in combat zones. Its technology provides crucial support for the Armed Forces, and Israeli intelligence has helped prevent terror attacks here in Britain.
It is obvious, in the face of Putin’s aggression, that we need to strengthen Britain’s air and cyber defences, and we are using Israel’s expertise in cyber security for that. So, I ask the Minister whether he will welcome Israeli defence investment in the UK, which has seen Israeli firms set up UK subsidiaries and establish joint ventures with UK defence companies, which provide good, highly skilled and well-paid jobs, as well as supporting our Armed Forces and the UK’s defences.
It is absolutely clear that the partnership between our two countries matters across so many sectors already, but there are huge opportunities in areas such as financial services, infrastructure, life sciences, AI and cyber security for the future.
The current trade agreement is 30 years old. It ensures tariff-free trade on 99% of goods but it predates even the invention of the internet, Israel’s emergence as a tech superpower, the growth of financial services here in the UK and the climate crisis. Given that services now count for 80% of both our economies’ activities, there is obviously great potential in digital trade, innovation, services, low-carbon and environmental technologies.
The UK’s new industrial strategy focuses on eight high-potential sectors, including clean energy, advanced manufacturing, defence, financial services, business, digital, technology and so on. These are all fields where Israeli innovation is recognised globally. This means that closer collaboration with Israel can help to meet our industrial strategy goals faster.
Can I draw to the Minister’s attention two initiatives launched by our embassy in Tel Aviv? First, Ambassador Walters and trade director Shapiro have launched ScaIL UK to accelerate the expansion of high-growth Israeli tech companies aligned with our industrial strategy into the United Kingdom.
Secondly, the work of the UK-Israel Tech Hub, which is led by Keren Shurkin, has brokered over 300 high-impact tech partnerships, which boost productivity and deliver sustainable economic growth. These partnerships have led to a growth of Israeli-founded unicorns in Britain and venture capital being invested in UK innovation, and they have improved the quality of life for stroke patients, reduced waste at our supermarkets and saved bank accounts millions in reducing fraud losses. Israel boasts the highest start-up density in the world, and the UK-Israel Tech Hub links this dynamism with our industrial strategy by engaging venture capital, entrepreneurs and accelerators that bring their skills, talent, capital and technology to the UK.
Israel is number three in the world for start-ups. Its economy is not just recovering from 7 October but rising stronger. London is the best city in Europe for start-ups, second only to New York globally. We have more tech unicorns than any city in Europe, so what greater partner could there be for the start-up nation than the UK?
In conclusion, the reason all this works is pretty straightforward: the longstanding partnership between two great countries. We are like-minded partners with shared values, free societies and open democracies. We are liberal countries which value the contribution of every citizen regardless of background or gender. We are two countries focused on trade and innovation, working together to create jobs, boost prosperity, improve defence and security, and tackle the world’s biggest challenges. This is the truth about our relationship with Israel. We should celebrate that success and do all we can to bring our two countries closer together.
Lord Leigh of Hurley (Con)
I congratulate the noble Lord, Lord Austin, on securing this debate and his excellent opening speech. I thank His Excellency Simon Walters, our man in Tel Aviv, and the Israeli embassy in London for its assistance in my comments.
As has been said, trade with Israel is strong, and the UK is the net beneficiary of that. Israel climbed to be in the top eight of European countries investing in FDI in the UK. Israel brings tested solutions in counterterrorism, emergency response, infrastructure protection and crisis management, and not just that but a huge social and political impact through trade. Trade with Israel supports thousands of UK jobs. Israel’s defence companies have UK subsidiaries, which manufacture here and provide income for hundreds of families.
Trade is such a huge topic that I will have to focus on a few areas. The first is defence. Nowhere has the UK benefited more from its relationship with Israel than in defence. Israel is the third-largest supplier of arms to the UK, and the contribution from Israel’s cyber companies has been enormous, which helps keep us all safe. The UK Government’s growth plans are all in areas where Israel can contribute and has globally recognised expertise. Of course, the third-largest concentration of AI start-ups in the world is in Israel.
In my opinion the UK is very unprepared for AI-driven drone warfare, but Israel has anticipated that future and we need to try to benefit from those skills. Unfortunately, banning arms sales to Israel has been extremely unhelpful at this time and now needs to be reversed, as does the ludicrous decision to ban Israeli defence officials from the Royal College of Defence Studies and then to ban Israel defence firms from a major London arms fair. The Royal College of Defence Studies has long accepted students from countries with dire human rights records, yet only Israel has been subject to blanket exclusion.
That takes me to my second theme: the hugely disappointing approach sometimes taken by UK Governments. As we know, the Labour Party talked out the BDS—boycott, divestment and sanctions—Bill, which was very important to UK-Israel relations. As I understand it—I am happy to be corrected—they have no intention to bring it back. Boycotts create a chilling effect: they deter investment, research and partnership far beyond their formal scope, and in fact, they nurture violence, extremism and antisemitism. The attempt to normalise the delegitimisation of Israel is pure antisemitism undertaken by bad actors with dangerous motives. It needs to be challenged rigorously at every opportunity.
Under this Government’s watch, unfortunately, Israeli factories in the UK have been invaded and huge damage has been done to equipment, as recently as last month, in Edinburgh. But, more importantly, these horrific and violent actions unsettle the UK staff employed at these crucial defence businesses, and they greatly discourage Israeli academics and professionals from coming here. I was in Israel last week with Conservative Friends of Israel, and people were all asking me, “What’s going on in the UK? Is it a safe place for me to go to?” That would have been unimaginable a few years ago.
The curtailment of the negotiations of a trade treaty in May 2025 was a disgrace. If the Minister cannot apologise for those decisions—because they happened well before his time in office—at the very least it would be good to hear from him when they will be reversed. Can he please tell us exactly what the trade policy is now in respect of Israel? Can he spell it out, please, as clearly as is possible? We want to hear from him, very loudly, that the UK is proud to be Israel’s supplier, customer, partner, ally and collaborator in many fields—including, for the purpose of this most welcome debate, trade.
Lord Stevens of Birmingham (CB)
My Lords, compared with some of the big debates facing us around phase 2 of the Middle East peace process, the urgent need to get reconstruction going in Gaza, and the Iranian people’s uprising against their theocracy, debates on trade can sometimes seem rather esoteric, although they are clearly important in terms of jobs and living standards. But I want to make very tangible—picking up some of the points of the noble Lord, Lord Austin—the importance of the bilateral relationship for health and life sciences.
The reason that is so tangible is that today, like every day of the year, millions of our fellow citizens—millions of NHS patients—will have taken a tablet supplied to them by an Israeli pharmaceutical company for a huge range of conditions, spanning multiple sclerosis, cancer, pain management and antibiotics. Millions of patients benefit and, frankly, the NHS saves billions of pounds as a consequence. One estimate put before the Commons science committee just before Christmas suggested that we gain about £2.4 billion of savings each year as a consequence particularly of that trade relationship we have, buying those medicines from a leading Israeli company, which turns out therefore to be a top-15 strategic supplier to the NHS.
There is another reason why it makes sense to have some geographical diversity in our medicine supply chain: it is no secret that at the time of the Covid pandemic, for example, we saw some questionable behaviour on the part of the European Commission seeking to restrict flows of vaccines and medicines. It is also no secret that the current US Administration has been putting significant pressure on the British Government to hike the drug prices that the NHS is paying. So having a range of other suppliers geographically around the world strengthens our resilience and our negotiating hand.
It is not just about medicines, of course, but also medtech, for the reasons we have heard. The Government’s 10-year health plan talks about the transition from analogue to digital. Frankly, the epicentre of where that innovation is fizzing away is not just in the US; it is also in a lot of the companies that the noble Lord, Lord Austin, referred to.
One point for the Minister would be that we had in 2023 the memorandum of understanding that set out the importance of these kinds of bilateral relationships in something called the 2030 road map. It would be very useful to hear where that has now got to in the context of the Government’s current trade policy with Israel. Again, if that could be spelled out and shared with us more clearly, it would also be of great interest to many of the British life sciences companies that supply their own medicines across the world, including to the Middle East and Israel. I am thinking of companies such as GlaxoSmithKline and AstraZeneca, for which this is hugely important. Of course, they are able to be successful because of the innovative science that happens not just in each of our countries but around the world. No country has a monopoly on science.
When the world’s most prominent scientific journal was publishing its year-end assessment of 10 of the breakthrough science discoveries in the last year, it referred to one of them at the Weizmann Institute. Unfortunately, the lab that had produced that discovery was then hit by an Iranian missile in the summer. But the conclusion that Nature magazine drew from those 10 discoveries, including that one of the Weizmann, is that they
“showcase the ongoing strength of science globally: its ability to transcend national borders … its power to save and improve lives … They also serve as a reminder of what is lost when governments … fail to nurture the international collaborative spirit that creates the breakthroughs that make the world a better place for all”.
Let us ourselves not make that mistake.
Lord Livingston of Parkhead (Non-Afl)
My Lords, I thank the noble Lord, Lord Austin, for tabling this QSD and I welcome, if rather belatedly, the noble Lord, Lord Stockwood, as a Minister. It is excellent to have somebody with his extensive business knowledge in the position. I think I am right in saying that he has a good knowledge of Israel, from his time in a kibbutz as a student, so he will be able to contribute in many ways.
I speak as an ex-Minister for Trade and Investment but also as someone who has been a director of many companies that trade around the world. While many other noble Lords have spoken about the size of trade with Israel, I will talk a little about quality rather than just quantity. There is a great fit between the UK and Israel in many sectors: life sciences, fintech, defence—which has been mentioned—AI, cyber and technology more generally. In fact, when I was CEO of BT, we had one technology scanning team for Asia, one for Silicon Valley, one for Europe and one for Israel. That gives an idea of the scale of technological innovation coming out of Israel.
As a Trade Minister, I recall how many Israeli companies would seek to come to the UK as their first point of expansion out of Israel. They were setting up their European or global hubs in the UK; indeed, one of the largest sources of AIM-listed companies was Israel. Yet we have the BDS movement, which uniquely agitates against a democratic country that has so many shared interests with the UK. I would point out to these protestors that, if they are truly serious in their misguided views and want to boycott Israel, they are going to have to do something different from picketing Barclays, which does not have much of a relationship with Israel, or standing beside the kosher counters of Marks & Spencer supermarkets.
If they want to be serious, for a start they must stop using their iPhones, which contain a huge amount of Israeli products. They must turn off their computers, because one of Microsoft’s major research hubs is based in Israel, and not use AI: Nvidia recently described Israel as its second home, so they would have to stop using AI. They must also reject the range of medicines and cutting-edge treatments that Israeli health companies provide. When they come down for their weekly protests, please can they not use the mapping software provided by Waze, which is Israeli, or the buses, because the software that supports all our bus scheduling comes out of Israel as well. I would tell them to get lost, but they will probably manage that on their own, in the circumstances.
It is also worth reflecting on the relationship between Israel’s universities and businesses, which I think we can replicate in the UK; it is particularly strong. I recently met the rector of one of Israel’s leading universities, who is a renowned neurobiologist. She told me that she had been disinvited from a number of conferences, presumably to strike a blow against the supposed Israeli apartheid. She is an Arab Maronite Christian. This highlights the absurdity of the BDS movement.
We need to recognise the substantial benefit to the UK of Israeli trade, but we also need to stand against the malign forces we are seeing, promote the benefits to the UK of this trade and assure Israeli companies that this is a good place to invest in order to create UK jobs, as the noble Lord, Lord Leigh, just said. I would be interested to hear how the Minister and his Government will, going forward, say that the UK is a good and safe place for Israeli companies to invest.
Lord Blencathra (Con)
My Lords, I am grateful to the noble Lord, Lord Austin of Dudley, for securing this debate. I declare that I am not Jewish, but I am a member of the Conservative Friends of Israel.
In the year to the end of 2025, the UK and Israel traded roughly £6.2 billion in goods and services, with the UK reporting a trade surplus of £1 billion over that period. Services account for a large and growing share of that relationship, and thousands of British jobs depend on exports to Israel. As we have already heard, the UK-Israel economic relationship is concentrated in high-value sectors such as technology, cyber, life sciences, finance and services, which support British jobs and R&D partnerships. Then, of course, there is the other trade that is vital to our economy and security: intelligence sharing and co-operation on the military and defence. We co-operate with Israel, the only democratic country in the whole of the Middle East, on signals intelligence, counterterrorism, cyber security and aerial surveillance data.
All of that co-operation with a trusted partner helps our trade. I regret that it has been put at risk by the foolish suspension of further FTA discussions and some restrictions on the supply of defence goods. Those were, I think, token gestures to appease some Labour Back-Benchers in the Commons who are fearful of losing their seats to pro-Palestinian agitators, and they risk weakening the very economic and diplomatic ties that have worked so brilliantly up to now.
Our close working relationship with Israel has been made possible for more than three centuries because Jewish people have been integral to our national life, building businesses, schools, hospitals, cultural and scientific institutions, and charities. British Jews have served in our Armed Forces in large numbers: around 40,000 in the First World War and 60,000 in the Second World War. These figures reflect sacrifice and loyalty to this country. Jewish citizens have been prominent in science, law, medicine, the arts and public life, enriching our national life through peaceful and industrious behaviour. Just look around this Committee and the House and reflect on the dozens of Jewish Peers who have contributed across religion, politics, the media and public service. The Jewish community has not sought special privileges but has long sought to belong, to serve and to improve Britain through hard work and civic engagement.
The relevance to this debate of the huge contribution that British Jews have made to this country is that many of them still have links with and have relatives in Israel. Israeli Governments and businesses saw that the UK was a Jewish-friendly country with which they could do business. I worry that that is now under threat with the despicable rise of antisemitism against the very community of whom we should be most proud in terms of what it has done for the UK. I am appalled to see those vile people in our streets celebrating the death of 1,200 Jews in the massacre on 7 October and cheering the murders in Manchester and Bondi Beach, leading the chief constable of Greater Manchester to say:
“The intolerable has become normalised, and has almost become accepted as the way that things are”.
We must not permit the intolerable to become normal. To those demonstrators, I say this: you have no right to protest until those whom you champion do what hundreds of good Jews have done for this country over the centuries.
I am proud to support Israel and stand with Jewish people in the UK. The work of British Jews and Israel over the past 60 years has made this country better through peaceful civic contribution—not by demanding special rights or committing acts of terrorism. They all deserve our respect, our protection and our increasing trade with them.
Baroness Altmann (Non-Afl)
My Lords, I congratulate my noble friend Lord Austin both on securing this debate and on his excellent introduction. I must thank from the bottom of my heart my friend, the noble Lord, Lord Farmer, for his remarks just now, which have almost brought me to tears. I declare my interest as a member of various APPGs on Britain and Israel and British Jews, and I associate myself fully with the remarks made by the noble Lords, Lord Leigh and Lord Livingston, on the BDS issue.
There are many important areas in which Israeli trade contributes significantly to the UK and helps improve our future economic growth. In my allotted time for today, I will focus on three vital issues: Israel’s contribution to our health, technological advances and security.
On health, as the noble Lord, Lord Stevens, explained, Israel supplies many medicines for the NHS and saves this country significant sums. There is a long history of co-operation between Israel and the UK on national and international health challenges. For example, the Rotherham, Doncaster and South Humberside NHS Trust is working with the Israeli firm Taliaz, with its AI technology supporting mental health patients; that is just one small example. Israel is a recognised global leader in digital health, biotech and medical innovations, as we have heard from other noble Lords. We have much to learn from the advances that Israel continues to make. I ask the Minister: how do the Government plan to expand scientific, medical and commercial co-operation with Israel to ensure that its breakthroughs directly support UK healthcare and bolster the NHS?
In science and technology, including environmental tech, Israeli innovation is world-renowned. Its advances can help the UK. As a global leader in fields ranging from sophisticated air traffic control systems to high-level security, it has developed improvements in sectors such as clean energy, the creative industries, life sciences, digital technology and services, which are core areas of the Government’s 10-year plan to boost the UK’s economy and productivity. Since these are such important areas of our plan for growth, does the Minister agree with me that closer co-operation with Israel can accelerate UK technological leadership, helping the Government meet their industrial strategy and growth goals even faster?
Lastly, on national security, including intelligence sharing and counterterrorism, Israel makes a positive contribution to the UK. Past Governments built a strong defence partnership and developed close co-operation on counterterrorism and cyber security, with Israeli experts playing an important role in defending our country against bad actors. In that connection, I repeat that it is an extreme disappointment that our Government have suspended some of our trade with Israel—and only Israel—on what I consider spurious grounds. There are hints of antisemitism. Given that both nations face increasingly complex security challenges, does the Minister agree that Israel-UK trade and co-operation can offer significant potential for boosting UK growth, innovation, intelligence collaboration and the joint development of advanced capabilities?
Lord Gascoigne (Con)
My Lords, it is a great honour to follow the noble Baroness. The problem with speaking so far down a list of many eminent speakers is that, I am afraid, a lot of the good stuff I was going to say has already been said—but I am still going to crack on.
This is the first time I have engaged with the Minister, so I congratulate him; I appreciate that he has been in his position for some time, but his is a fantastic role. I also congratulate my personal friend, the noble Lord, Lord Austin, not just on securing this debate but on all of the great work that he does as a trade envoy, in standing up for the Jewish community in this country and in tackling antisemitism.
As everyone has already said, it is important that we are honest about what is already true and the facts of the relationship with Israel, which are often, I am afraid, overlooked or selectively disregarded. The relationship, as has been said, is incredibly strong. Co-operation extends beyond trade into counterterrorism, research, technology and AI. It is one of the few major trading relationships in which we enjoy a trade surplus, and it is one that continues to grow. I am sure that the Minister will agree that it is one of the many virtues of Brexit that the ability to pursue new trade agreements means that we can also pursue our own national interests at the same time. As has been said, sadly, part of a new trade agreement under discussion has been halted.
Trade is not just commercial, though: it is the arena for engagement, co-operation and influence. If the Government felt unable to continue those talks during the war, what precisely is preventing their resumption now that the war is over? If the issue is aid, surely the Government can set out the threshold they expect to see. If it is about human rights, are we saying that we will suspend or abandon all trade discussions with every country with whose record we have concerns, or is this approach being applied only to Israel? If the concern is around a lack of progress on the peace plan, this week, even the Government briefly touched on the need for Hamas to disarm as part of that process, as my noble friend Lord Massey noted in the debate last night. The point is that it is widely recognised that the obstacles on the ground are not solely of Israel’s making.
So what is holding us back? Is our economy performing so well that we can afford to turn away deeper trade with a key partner? If the Government are so opposed to Israel’s actions, do they no longer consider Israel an ally? If we truly objected to Israeli policy, why did we not suspend all trade rather than only these new discussions? Like my noble friend Lord Blencathra, I am afraid to say that this makes me feel as though this was simply something for the Prime Minister to placate his Back-Benchers. If we were so opposed to what Israel was doing, why did we not apply the same approach to the United States, whose support for Israel was unequivocal?
If the Prime Minister objects to President Trump’s actions in Venezuela on the grounds of international law, will we now curtail economic ties with America on that basis? I hasten to add that I do not agree that we should—personally, I think that we should be congratulating it—but this is an inconsistency. I cannot help but feel that, at times, the Prime Minister appears to be intentionally trying to send different messages to different audiences, banning Israelis from the Royal College of Defence Studies and cancelling certain defence exports to appear tough to one group, as has been said, while maintaining the bulk of defence co-operation and the purchasing of arms—that has been mentioned—to reassure another. There was the announcement of the recognition of Palestine—but not immediately—and the halting of new trade talks while maintaining the wider relationship.
If we are serious about supporting a two-state solution, disengagement does not help. The Trump peace plan explicitly envisages Israeli investment in the reconstruction and economic stabilisation of Gaza. A prosperous and secure Israel is essential for Israelis, Palestinians, the region and our own national interest. Now that the war has ended, surely this is a moment to re-engage, rebuild momentum and strengthen that relationship, to the benefit of both nations; that is in the interests of the region, economic growth in this country and our shared security.
Lord Massey of Hampstead (Con)
My Lords, I congratulate the noble Lord, Lord Austin, on initiating this interesting debate. I welcome the noble Lord, Lord Stockwood, to his new role as Minister.
As noble Lords have mentioned, Israel and the UK have a very strong trading relationship, with a high proportion of technology and high value-added goods. There is, of course, enormous potential for growth. Israel’s success story as a growth economy, despite living in an almost perpetual state of war, is truly remarkable—almost miraculous. If one looks at a comparison of its growth with that of countries such as the UK, Germany or France, one sees that Israel has grown its key wealth metric, GDP per capita, from $26,000 in 2005 to more than $60,000 today—more than doubling in two decades. By contrast, the UK and other European countries have increased their GDP per capita in that timeframe by about 25%. So Israel started 50% behind us 20 years ago and has now outstripped the UK, Germany, France, Italy and Spain on a per capita basis—a remarkable achievement.
How has it done this? There may be some lessons to be learned for us. Entrepreneurship and technological innovation have been the main drivers of its outperformance. Its weighting of its tech sector, in terms of percentage of workforce and percentage of GDP, is double ours, so it brings very complementary skill sets to our own economy.
Israel is an ideal trading partner for the UK, bringing expertise in technologies, as many noble Lords have discussed today, such as cyber, AI, clean energy, biotech, defence equipment and electronics. Those are areas that we need in order to grow, and we have the additional benefit of running a £1 billion surplus with it as it buy our business in financial services, cars and pharmaceuticals. That is why Israel was one of the first countries targeted for an FTA post Brexit. The last Government began to update the trade deal in 2022 in order to support cross-border services, both professional and digital, but of course in May this year, as has been mentioned, the Government decided to freeze negotiations on the FTA that would have significantly enhanced the economies of both nations. They did so because this Government do not like the way that Israel has prosecuted the war in Gaza, despite the fact that its enemy is an Islamic terror group hell-bent on the destruction of Israel and the Jews.
Thus far, the £6 billion of trade carries on because business needs it to, not because of any actions by the UK Government, but growth is on hold—another decision, if I may say so, where this Government have placed politics ahead of their much-vaunted objective of generating economic growth. In the meantime, Israel has entered into serious FTA discussions with a much larger and faster-growing trading nation: India, no less—and we wonder why the UK is falling behind.
We are placing a valuable long-term relationship at risk, as the noble Lord, Lord Leigh, suggested. I urge the Government to reconsider the decision of last May at the earliest opportunity, now that a ceasefire has been reached and a peace plan signed. The Government have stated that it would take “a sustained shift” in the Israeli position for the Government to resume negotiations. I invite the Minister to comment on his understanding of what would constitute such a shift and whether he would support the further expansion of our trading relationship with Israel.
Lord Bew (CB)
My Lords, I thank the noble Lord, Lord Austin, for securing this debate. I express my agreement with the themes of his speech and those of many other speakers this afternoon. I welcome the Minister to his new position.
I declare the interest that I was for more than 10 years the chairman of the Anglo-Israel Association. En passant, in those 10 years I would frequently, as a strong supporter of and much engaged in the Good Friday agreement, argue with Israeli audiences and say, “You ought to be careful. Let’s not assume that Hamas are as fundamentalist as they appear to be. After all, it turned out the IRA weren’t”. After 7 October, that argument inevitably falls on stony ground. I have made that argument for 10 years but it can no longer be sustained. That is the tragedy of the position we are now in: Israel has no alternative but to fight a many-sided war in which it cannot afford to end up appearing as a weak horse, to use Osama bin Laden’s dictum. I am afraid I do not think our Government are fully facing up to that brutal and unfortunate reality.
When I first came to this House in the summer of 2007, the boycott movement was just about getting going and there was a debate covering many of the same themes that we have covered today. I looked at it again in preparation for this debate, and the one thing I would say is that those who spoke in favour of Israel, including the importance of scientific co-operation, the medical achievements of Israel and so on—there were many distinguished academics who spoke—actually understated their case. As I look back on it now, the case is much stronger. The fact is that Israel is now a world leader in medical and paramedical research, and it is tremendously important to acknowledge that. Many speeches have made all the points. It is not just a question, as the noble Lord, Lord Leigh, says, of the thousands of people in England who owe their jobs to Israeli investment; there are quite lot of people walking around now who owe their lives to Israeli achievement in the medical and scientific spheres. As I say, those who defended Israel 18 or 19 years ago in this House understated the case that we made for the importance of collaboration with Israel in medical and scientific matters.
The noble Lord, Lord Austin, referred to the great work in this area of our ambassador in Israel, Simon Walters. I agree, and I am rather proud that Simon Walters comes from exactly the same part of the world that I do. I take a certain chauvinistic pride in that.
I have one final point. The Royal College of Defence Studies was raised. For many years I lectured there, and I was happy to do so. As has been rightly said, many of the soldiers I spoke to did not come from the most liberal, democratic countries in the world, but I still did it and I still think it was the right thing to do. I have had to stop now as a consequence of that decision, which is just astounding and very unfortunate. It is a difficult matter for the Minister to comment on, but I hope he realises that many of us are very unhappy with that particular decision.
The Earl of Courtown (Con)
My Lords, I thank the noble Lord, Lord Austin, for introducing this really interesting debate. He ranged into a whole lot of different areas and pinpointed some of the great pieces of trade between our two countries.
His Majesty’s loyal Opposition are clear that trade with Israel is a positive thing, as we have all stated, and that we should be consolidating ties with our closest ally in the region and looking to expand them into the future. We should not, as the Government are intent on doing, be closing channels and limiting agreements based on moral posturing rather than the empirical reality.
The last Government understood this. That is why we signed a trade continuity agreement with Israel that commenced upon our exiting of the European Union. We knew that close links contribute to our countries’ prosperity, which is why we relaunched negotiations for a new deal in 2022. As a result, Israel stands as a growing contributor to our economy. In the four quarters leading up to Q2 2025, total trade between the two countries, as mentioned by noble Lords, amounted to £6.2 billion, £3.6 billion of which came from Israel buying British goods and services—up more than 10% on the year.
Israel is a vital trade partner to the United Kingdom. The former Trade Minister in the other place, Douglas Alexander, noted that one in eight of the prescribed drugs available through the NHS is provided by an Israeli company—it was really interesting to hear from the noble Lord, Lord Stevens of Birmingham, a bit more detail on the different drugs being imported to this country. Yet that is despite rather than because of the Government’s best efforts. They have cut trade, amended policy to specifically exclude Israel from arms programmes, and have most recently suspended the free trade agreement negotiations that the Conservatives started.
What is particularly damaging is that these suspended negotiations had the aim of expanding trade to financial services and digital trade—our biggest sectors. Services comprise about 80% of Israel and the United Kingdom’s economies. Telecommunications and IT services trade with Israel surged by over 40% last year, and yet services make up just over a third of the total trade between our two countries. Renewed trade negotiations and a renewed trade deal would galvanise the service sectors of both economies. They would drive competition, promote innovation and stimulate growth. The Government are missing the opportunity, through their adherence to a vindictive and, I am afraid, misguided policy. I hope the Minister will reconsider the position his Government currently hold and I look forward to hearing his response.
The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)
My Lords, I am pleased to respond to this Question for Short Debate. I start by saying that I have visited Israel on many occasions over the years, both for personal and business reasons. Some visits started many years ago, as mentioned by the noble Lord, Lord Livingston. I still have a number of friends who live in the country, and in particular, as someone who has spent decades as an entrepreneur, I am a huge advocate and admirer of its tech sector, which many noble Lords mentioned in the debate.
Israel is without doubt a vibrant, dynamic democracy and a fast-growing economy. While this Government have consistently made our concerns with the conduct of the Israeli Government known, Israel remains a trading partner that plays a significant role in the UK’s economy, with business and personal ties that we continue to value greatly. The UK is committed to our existing trading relationship, and we retain the services of the noble Lord, Lord Austin, our trade envoy, to maintain our relationships with Israeli businesses and attract inward investment in key sectors of the industrial strategy. I express my personal thanks to him for bringing this debate to the Committee today and echo his comments about the British Embassy in Tel Aviv and His Majesty’s Ambassador Simon Walters, who provided me with some helpful advice in our meeting in December.
Israel’s innovative, high-tech economy is well aligned with our own, providing an avenue for critical imports in key sectors mentioned, such as healthcare, medicines for respiratory care, neurology, oncology and pain management to support the treatment of chronic and high-burden diseases. Our economies are highly complementary, with clear parallels in services, technology and advanced manufacturing sectors. We have seen Israeli firms expand in the UK across strategic sectors such as cyber security, climate and energy, fintech and the automotive sector. These all fit neatly into our industrial strategy, as mentioned, and our trade strategy, and as such support our economic growth as a nation. Trade with Israel supports thousands of jobs across the UK. This is especially true across the north and the Midlands, which benefit from Israeli investment, and firms in the advanced manufacturing sectors.
Reflecting our shared heritage as tech-savvy and innovative entrepreneurs, more Israeli tech companies operate in the UK than anywhere else in Europe, as was mentioned by the noble Lord, Lord Austin. Co-operation between our nations is extensive, particularly in the sphere of scientific research and development. British and Israeli scientists collaborate on research and development projects, resulting in new products, industrial processes and services. This has led, for example, to the Leeds-Israel Innovation Healthtech Gateway, a collaborative initiative designed to strengthen ties between the UK and Israel in the health sector.
We continue to build on these relationships, including, as mentioned by the noble Lord, through the recently launched ScaIL UK initiative, a first of its kind programme led by DBT and the British Embassy in Tel Aviv. It is designed to help scale-ups establish a strong UK presence by unlocking opportunities in the aforementioned eight priority sectors of the UK industrial strategy, from advanced manufacturing and clean energy to digital technology and life sciences. As a result, these selected high-growth companies will gain practical insights, strategic guidance and direct connections to drive physical expansion, job creation and impactful commercial activity in the whole UK market.
All this is supported under our current trade agreement with Israel. The UK-Israel Trade and Partnership Agreement rolled over, post Brexit, from the 1995 EU-Israel Association Agreement. Accordingly, in line with our European friends and partners, the UK-Israel TPA does not grant preferences to goods from illegal Israeli settlements. Furthermore, we neither support nor condone commercial or financial activity undertaken by British businesses with entities in these illegal settlements. Government guidance is absolutely clear that trading with these settlements brings significant risk and that businesses should seek legal advice before undertaking such activity.
It remains this Government’s firm belief, as set out in the trade strategy last year, that more trade with dynamic and fast-growing partners will generate economic growth in the UK, supporting British jobs and providing the prosperity we need and everything that is foundational to this Government’s growth mission. However, we have also been clear that an enhanced trading relationship with Israel cannot come at any cost. That is why, as the Committee will be aware, we took the decision to pause negotiations on an enhanced trade free trade agreement in May this year in response to the Israeli Government’s rhetoric and actions in Gaza and the West Bank. Since that announcement, we have been, and continue to be, clear that we would need to see sustained change in the Israeli Government’s position before we could resume trade negotiations—and to answer the question from the noble Lord, Lord Stevens, that extends to the RCDS courses.
However, we welcome the moment of significantly profound relief and hope that the ceasefire agreed early this year, after two years of devastating suffering, has brought to all. This Government will continue to do all we can to support an enduring ceasefire, and the UK will continue to play our part in supporting not just the implementation of phase 1 of the peace initiative but the crucial work going forward now in phase 2. In line with this, we will continue to monitor the situation in Israel and Palestine and work to support long-term peace and stability in the region. The UK clearly believes that a two-state solution is the only path to justice for Palestinians and enduring security for Israelis. A two-state solution, with a safe and secure Israel alongside a viable and sovereign Palestinian state, is the only path to lasting peace for the Israeli and Palestinian peoples.
Before I conclude, I would like to take the opportunity to address some of the outstanding topics raised by noble Lords during the debate that I have not yet referred to. Several noble Lords raised the issue of antisemitism. Let me be really clear on this: the UK Government are absolutely committed to combating antisemitism in the UK and globally. We will not tolerate antisemitism on our streets.
On the issue of BDS, I say to the many noble Lords who raised it today that the UK Government are committed to promoting our trade and business ties with Israel and strongly oppose boycotts.
We will continue to monitor the situation in Israel and Palestine and work to support long-term peace and stability in the region. If it remains the case, in the long term, the UK and Israeli economies are strongly compatible, with plenty of significant opportunities for our businesses. To that end, we will continue to support and encourage the business-to-business and people-to-people connections that underpin any successful trading relationship and maintain our frank and open dialogue with the Israeli Government, which is important between trading partners.
Lord Leigh of Hurley (Con)
Can the Minister say exactly what he wants to see, further than a ceasefire, to restart the trade talks?
Lord Stockwood (Lab)
We are waiting to see phase 2 of the ceasefire put in place. At that point, the dialogue can continue.