Britain risks reduced access to Israeli intelligence after it imposed an import ban on goods from illegal settlements in the occupied West Bank, Middle East insiders believe.

Foreign Secretary Ed Miliband announced the sanctions on the mainly agricultural produce from the occupied territory in response to what he said were the unlawful actions of Israeli settlers which in some cases amounted to “ethnic cleansing” of Palestinians.

The decision – and incendiary language – immediately sparked a major diplomatic row with Benjamin Netanyahu’s government and plunged UK-Israeli relations to their worst level for decades.

In retaliation, Israel closed the British consulate in East Jerusalem – the main point of contact between the UK government and Palestinians – banned 12 Labour, Green and independent UK MPs from entering Israel, including Jeremy Corbyn and Diane Abbott, and kicked Britain out of the US-led post-Gaza mission.

Decision could cause ‘friction’ for security arrangement