Britain's most sensitive and controversial relationship in the Middle East faces protests and boycotts during a state visit by King Abdullah of Saudi Arabia, just weeks after a lucrative new defence contract made clear that it was business as usual between the two countries.

The Saudi monarch and his most senior ministers will be the guests of the Queen at Buckingham Palace during a visit that will include a ceremonial welcome on Horse Guards Parade, two banquets and meetings with Gordon Brown, David Cameron and Prince Charles.

But Vince Cable, the acting Liberal Democrat leader, announced yesterday that he would boycott the rare visit because of the Saudi record on human rights, including its maltreatment of British citizens. "It is quite wrong for the British government to have proposed a state visit at this time," Mr Cable said. Other groups plan protests over weapons sales, the kingdom's human rights abuses and its homophobic laws.

King Abdullah, 82, came to the throne two years ago. Known as "the Custodian of the Two Holy Places" (of Mecca and Medina) he has reformist instincts, but progress in the kingdom has been halting.

Saudi Arabia is Britain's biggest trading partner in the Middle East and the UK is its second biggest foreign investor.

The four-day visit, which begins today, was announced months after the Serious Fraud Office was forced by Tony Blair's government to drop - on alleged national security grounds - an investigation into alleged corruption tied to BAE arms sales to Saudi Arabia, part of the massive al-Yamamah deal.

The Guardian and BBC reported that Prince Bandar bin Sultan, now the king's national security adviser, received secret payments of £1bn. BAE denied wrongdoing and Prince Bandar called the reports "false". The prince will also be staying at Buckingham Palace.

Prince Mohammed bin Nawaf, the Saudi ambassador to Britain, insisted his government had nothing to say on the BAE affair. "This is a British controversy," he told reporters. "The future of our relationship will not be held hostage because of an issue that happened a long time ago."

Sir Alan Munroe, a former British envoy to Riyadh, agreed: "At the moment the UK-Saudi relationship is in a very healthy phase, having recovered from the whispering campaign about how Yamamah had been put together."

But the Campaign Against the Arms Trade said: "It is not in the British public interest for our government to be subservient to BAE and the Saudi regime. Gordon Brown has a chance to demonstrate his independence from both by reopening the BAE-Saudi corruption inquiry."

Saudi Arabia last month agreed to buy 72 Eurofighter Typhoon fighter planes from the UK at a cost of £4.43bn - the biggest export order yet for the aircraft.

British officials publicly paint the relationship in a positive light. Privately, however, some admit it is a difficult one. Praise for the Saudis' improved performance on fighting terrorism, especially a programme to rehabilitate ex-jihadis, is coupled with concern about the numbers of young men able to slip across the border to join the Iraqi insurgency.

A "two kingdoms" conference being held in London today will highlight the themes of youth and education.

Prince Mohammed said: "I am offended when I see us portrayed as a barbaric country. We are not a stagnant nation." But the kingdom's image remains poor. Peter Tatchell, the gay rights activist, said: "As well as flogging and executing gay people, Saudi leaders are guilty of detention without trial, torture and the public beheading of women who have sex outside of marriage. Migrant workers are de facto slaves. The media is heavily censored. Trade unions, political parties and non-Muslim religions are banned. The country is a theocratic police state."

The Labour leftwinger John McDonnell said: "Why is it that in the same breath the prime minister condemns the lack of democracy in Burma and the abuse of human rights in Zimbabwe, but remains silent when it comes to the Saudi dictatorship?"

Political topics that are certain to be covered during the king's visit underline Saudi Arabia's strategic position in the Middle East. These include the threat of US attacks on Iranian nuclear sites, the situation in Iraq and the question of whether the Saudis will attend the forthcoming US-organised Middle East peace conference in Annapolis.

King Abdullah is planning a rare interview with BBC television, but is likely to leave any significant statements to his veteran foreign minister, Saud al-Faisal.