Foreign Secretary William Hague has said that European trade sanctions against Israel are not an option, Reuters has reported.

"I don't think there is enthusiasm around the European Union ... about economic sanctions in Europe on Israel. I don't believe there would be anywhere near a consensus nor is that our approach,” Mr Hague said.

“Nevertheless, if there is no reversal of the decision that has been announced, we will want to consider what further steps European countries should take.”

However, Mr Hague told parliament hat he was in talks with leaders of other European countries as to how to create incentives to bring Israel and the Palestinians back into peace talks.

Reports that the UK had threatened to revisit EU trade agreements were floated on Monday, apparently in reaction to Israeli Prime Minister Benjamin Netanyahu’s announcement that 3,000 new Jewish homes would be planned and zoned in an area east of Jerusalem, over the Green Line.

Israeli ambassador Daniel Taub was called in to the Foreign Office on Monday in order for the government to express its disapproval at this move, but the government has denied there are plans to recall the UK ambassador to Israel.