The UK government is moving to ban trade in goods produced in Israeli settlements in the occupied West Bank, marking a significant change in Britain’s policy towards Israel and the Israeli-Palestinian conflict.

Foreign Secretary Ed Miliband is expected to set out the measures in Parliament, with the government saying the policy is intended to support the prospects of a two-state solution and respond to continued Israeli settlement expansion.

The restrictions are expected to focus specifically on settlement-produced goods rather than a wider boycott of Israeli products. Agricultural exports, including fresh produce and wine, are among the products likely to be affected. The government has indicated that the overall impact on the UK's approximately £6 billion annual trade with Israel is expected to be limited.

The decision has already generated international criticism, with concerns about its potential impact on UK-Israel relations and diplomatic cooperation. Supporters argue that stronger economic pressure is necessary to discourage settlement expansion and protect the possibility of a future Palestinian state.

For Prime Minister Andy Burnham, the decision represents an important foreign-policy test early in his government. It could also become a significant issue in Britain's wider debate over foreign policy, international law and relations with key allies.