Anne-Marie Trevelyan, the International Trade Secretary, is meeting Israel’s Ambassador to the UK, Tzipi Hotovely, on Wednesday to launch negotiations on a new Free Trade Agreement (FTA).

The UK’s current agreement with the Jewish state, which was rolled over following Brexit, allows for free trade in goods.

Now the UK and Israel hope to strike a new deal to boost their service sectors, which dominate both economies.

Ms Trevelyan said: “The UK and Israel are both modern, hi-tech services superpowers, but our current trading relationship is based on an agreement from 1995, before smartphones, the internet, and digitally delivered services transformed the global economy. 

“We want a deal that will play to British strengths, while stimulating innovation and increasing opportunities for small and medium-sized enterprises across the UK. 

“Combining the power of our economies in a revamped trade deal will boost trade, support jobs and help take our economic relationship to the next level.”

Ms Hotovely said: "The respective UK and Israeli economies complement each other in many fields.

"A modern free trade agreement will open new channels for collaboration in R&D, innovation and investment between our two countries, whilst simultaneously strengthening both economies.

"I am, therefore, very pleased that the Free Trade Agreement negotiations are being launched today, building on the strong collaboration that Israel and the UK enjoy, and I look forward to getting an FTA in place in the near future."

Economic ties between Britain and Israel are already well established, though trade experts say there is a strong case for now upgrading the FTA.

Trade between the two countries is already valued at £5 billion a year. The new deal could reportedly benefit 6,600 UK businesses, including 5,600 small and medium-sized enterprises, employing around 1.7 million people, who are already trading with the Jewish state.

Around 500 Israeli businesses operate in the UK, employing more than 7,000 people across the country. 

Investors based in Britain meanwhile have pumped £1 billion in foreign direct investment into the Israeli economy.

Amanda Tickel, head of tax and trade policy for Deloitte UK, said: “We welcome negotiations between the UK and Israel on an enhanced FTA, which could take our bilateral trade and investment relationship to a new level. 

“Both the UK and Israel are services-led economies with highly successful tech sectors, yet the existing terms of trade contain only limited provisions in these areas. 

“This negotiation represents an exciting opportunity for UK services exporters, making it easier to trade across borders, to travel and work in each economy and support our digital innovators.”

From February until March, the Department for International Trade ran a “Call for Input” on what the British government ought to prioritise in its trade talks with Israel.

In May, Britain hosted a UK-Israel Innovation and Investment Summit, bringing together government ministers and industry experts.

Daniel Moczulski, eToro UK Managing Director, said a “crucial part” of the Israeli financial service company’s development was its arrival in Britain.

He added: “The UK market has become incredibly important to eToro’s business, and we are lucky to have a very talented team in London serving a large number of UK retail investors – we welcome the launch of UK-Israel trade talks to create more opportunities for innovators in both the UK and Israel.”