Britain is to share diplomatic missions with "first cousins" Canada under plans that the Foreign Office hopes will cut costs but which critics in Ottawa claim could reduce their country's independence abroad.

In an agreement unveiled on Monday evening in the Canadian capital by the foreign secretary, William Hague, and his Canadian counterpart, John Baird, the two countries will start "co-locating" embassies and sharing consular services in countries where either lacks official representation.

Asked whether Britain could eventually adopt the same arrangement with Australia and New Zealand as well, the Foreign Office said that while the initiative was "at an early stage", discussions had also been held with both countries about the potential for greater co-operation in overseas missions.

Before the meeting in Ottawa, Hague said: "As the prime minister [David Cameron] said when addressing the Canadian parliament last year: 'We are two nations, but under one Queen and united by one set of values.' We have stood shoulder to shoulder [in situations from] the great wars of the last century to fighting terrorists in Afghanistan and supporting 'Arab spring' nations, like Libya and Syria.

"We are first cousins. So it is natural that we look to link up our embassies with Canada's in places where that suits both countries. It will give us a bigger reach abroad for our businesses and people for less cost."

Diplomatic co-location is not unprecedented: a British diplomat already uses space in the Canadian embassy in Mali, while in Burma a Canadian diplomat is temporarily housed in the British embassy as Ottawa establishes a more permanent presence. The UK also shares several premises with France and Germany.

It is understood that the agreement with Canada could allow for enhanced co-operation, for instance in the sharing of administration costs. The Foreign Office said: "This declaration sets out a number of areas for further co-operation, including co-location, crisis response, security and consular co-operation."

The coalition government sees the move as a means of reducing costs in some countries while shifting the focus to parts of the world deemed increasingly politically and economically important.

Even as it grapples with spending cuts, the Foreign Office is expanding in countries including India, China, Brazil, Turkey and Kyrgyzstan, and has recently appointed a Nairobi-based ambassador to Somalia.

In Canada, however, the initiative has drawn criticism. The Globe and Mail in Toronto asked whether the resource-sharing could prove "a return to [the] colonial past". It quoted Paul Heinbecker, a former Canadian ambassador to Germany and the country's permanent representative to the UN, as saying: "We have an incompatible brand with the UK."

Heinbecker, who referred to past disagreements over issues including Bosnia and apartheid-era South Africa, is also said to have raised concerns over a potential for greater security risks to Canadian diplomats, particularly in the Middle East. "The idea that we have a sufficient amount in common with the British that it makes sense that we share premises as a matter of routine … I think, is a mistake," he said.

The move also led the opposition New Democratic party to question whether Canada's independence on the international stage would be compromised. Stephen Harper, Canada's conservative prime minister, is a passionate anglophile.

Referring to reports that Tory Eurosceptics would welcome the development to counter the expansion of the EU's diplomatic corps, the External Action Service, Paul Dewar, an NDP MP, said: "If the UK is wanting to strengthen its resolve against the EU, we shouldn't be pawns in their game."

Speaking to the Toronto Sun, he added: "This is about who represents Canada and our interests. Who's going to represent Canada when competing issues, such as trade, or issues we strongly disagree on, such as fighting in Iraq, come up?"