It was “more than strange” that a UK government agency last week issued a report assessing overseas business risks associated with dealings with Israel that discouraged British firms from doing business with West Bank settlements, an Israeli official told The Times of Israel on Tuesday.

The agency, UK Trade and Investment, warned businesses of the “clear risks related to economic and financial activities in the settlements,” which are “illegal under international law, constitute an obstacle to peace and threaten to make a two-state solution to the Israeli-Palestinian conflict impossible.”

The report urged firms contemplating economic or financial involvement in settlements to seek legal counsel on the matter, and also addressed the “potential reputational implications” that could result from dealing with businesses beyond the Green Line, as well as “possible abuses of the rights of individuals.”

The report, issued December 3, is “not really anything new,” the Israeli official said. The recommendation itself does not have “the slightest legal basis,” he added, making it “more than strange that it should be issued” and invoke possible legal repercussions of doing business with settlements.

“The fact that no such recommendation was issued regarding other controversial territories… is an indicator of the hypocrisy that lies beneath this move,” the source said.

Noting that the British government “considers all territory captured by Israel in 1967 as occupied and the status of Jerusalem … as subject to negotiations with the Palestinians,” the agency said the UK does “not encourage or offer support” to “financial transactions, investments, purchases, procurements” and other economic activities “in Israeli settlements or benefiting Israeli settlements” — including tourism.

The agency added that any British dealings with settlements “may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment.”

In an effort to further discourage UK businesses from considering financial engagement with settlements, the agency also stated that goods exported from Israeli settlements could be labelled as such in the UK by law, and that products produced in settlements weren’t entitled to benefit from preferential tariff treatment under the EU-Israel association.

Aside from the warning on settlements, UK Trade and Investment’s report on Israel contained much praise as well, describing the country as “a safe place to do business,” where foreign business people are “warmly welcomed.” Israel, a “world-leader” in high-tech, is “a growing market for UK companies,” the report said, adding that “the UK Government is deeply committed to promoting our trade and business ties with Israel and strongly opposes boycotts.”

The trade group announced several days ago the organization of a market visit to Israel for potential investors, focusing on the water and environmental sectors, to take place in February, 2014.