Britain deciding today whether to withdraw its Ambassador to Israel.

Britain is considering withdrawing its ambassador to Israel over the country's settlement building plans, Sky sources say. The Government is expected to decide later today how to respond to Israel's plan to allow further settlement building in the controversial E1 area of East Jerusalem.

Sources have told Sky News that the Foreign Office is considering what action to take saying "all options are on the table". This could include withdrawing the British ambassador to Israel and the suspension of trade agreements.

Israel approved proposals to build 3,000 additional homes last week in a controversial plan that would effectively cut off Palestinians in East Jerusalem from the rest of the West Bank. Britain's diplomatic threat comes the day after the settlement plans were slammed by the head of the United Nations Ban Ki-moon as an "almost fatal blow" to peace hopes. Any diplomatic action by Britain is likely to be taken in concert with other European powers, with France currently playing a crucial role in coordinating joint action.

[link to news.sky.com]