Israel: Trade

Lord Massey of Hampstead Excerpts

Thursday 8th January 2026 Grand Committee

[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.