The British government is warning companies of the ‘reputational implications’ of getting involved in the Israeli occupied territories as well as of rights abuses to individuals.

The recommendations which have appeared on the UK Trade and Investment website in an “Overseas Business Risk Report” for Israel, say that “EU citizens and businesses should also be aware of the potential reputational implications involved in economic and financial activities in settlements, as well as possible abuses of the rights of individuals.”

The advice clearly states that the UK does not recognize Israeli settlements in the West Bank, East Jerusalem, Gaza, and the Golan Heights, which Israel has occupied during the 1967 Six Day War.

The report also states that there are financial risks in doing business in the occupied territories and that the British government will not “encourage or offer support to such activity.”

“Financial transactions, investments, purchases, procurements as well as other economic activities (including in services like tourism) in Israeli settlements or benefiting Israeli settlements, entail legal and economic risks stemming from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognized as a legitimate part of Israel's territory,” the warning says.

“This may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment.”

“Settlements constitute an obstacle to peace and threaten to make a two state solution to the Israeli-Palestinian conflict impossible”, the warning adds.

Israeli diplomats in London and the Foreign Ministry officials in Jerusalem told their British counterparts that they were disappointed in the recommendations, Haaretz reports.

“We told them we are currently holding talks with the Palestinians and thus issuing such a recommendation at this time will only do harm,” a senior Foreign Ministry official told the newspaper.

The official added that there were no such recommendations to other areas of the globe under occupation such as Western Sahara, a piece the Sahara desert occupied by Morocco, or Tibet, which is an area of the Himalayan mountains occupied by China, although it is unclear exactly how much British commerce goes on in these sparsely populated regions of the world.

The British government warning comes just months after an EU directive in July which stated that all future agreements between the EU and Israel must exclude Jewish settlements in the West bank or East Jerusalem.

EU guidelines prohibit the issuing of grants, funding, prizes or scholarships unless a settlement exclusion clause is introduced whereby the Israeli government would be required to state in writing that settlements in the occupied territories are outside the state of Israel.

The EU directive covers all areas of co-operation including economics, science, culture, sports and academia, and was viewed in Israel as a penalty and heavily criticized by Prime Minister Binyamin Netanyahu.

Last year the UK company the Co-operative Group became the first major European supermarket chain to end trading with companies exporting produce from illegal Israeli settlements in the West Bank. The Co-Op, as it is known, is the UK’s largest mutual insurance business and its fifth biggest food retailer. Its decision affected some £350,000 ($573,000) worth of contracts.

This October the Palestinians began a diplomatic campaign against the Israeli occupation by calling on more than 50 countries to ask companies linked to Jewish settlements in West Bank and East Jerusalem to withdraw their investments because the settlements are a violation of international law.

The governments contacted by the Palestinians include countries in Europe, Latin America, Australia, Japan, South Korea and South Africa and are home to over 500 companies with business in the settlements.