Guidance

Overseas business risk: Israel

Updated 16 June 2023

The Overseas Business Risk report provides information on key security and political risks which UK businesses may face when operating in Israel.

Due to the ongoing conflict in Israel and the Occupied Palestinian Territories, you should also view the latest travel advice for Israel.

1. Political and economic

With its strong economic performance in terms of growth, low inflation and a low unemployment rate, Israel offers an attractive growing market for UK companies. Total trade in goods and services (exports plus imports) between the UK and Israel was £7.2 billion in 2022. UK exports to Israel have grown from £1.1 billion in 2009 to £2.4 billion in 2016 and encompassed a wide range of sectors. The UK government is committed to promoting our trade and business ties with Israel and strongly opposes boycotts.

Israel rates well for ease of doing business, and British-made products have an excellent reputation for quality. Israel is governed by a democratically elected parliament with a traditionally high participation in elections. The head of state is the President, elected by parliament to serve a 7 year term, however executive power tends to lie with the Prime Minister and the Cabinet. Over the past 30 years no single party has gained a majority in the 120 seat parliament so Israel has been governed by a succession of coalitions.

Israel is a technologically advanced market economy with rapidly developing high-tech and service sectors and is a world leader in software, telecommunication and semiconductors development. Its economy functions like those in Western Europe, and its gross national product of 49, 189 USD per capita exceeds those of several EU Member States. Israel has been an associate member of the European Union since 1995 and became a full member of the OECD in 2010.

In 2022 Israel ranked 22nd among 187 world nations on the UN’s Human Development Index, which places it in the category of “Very Highly Developed”, and its economy was ranked 34th in the 2023 Index of Economic Freedom.

Israel’s GDP grew by 6.9% in 2021, inflation (consumer price %) stood at 4.4% in 2022, with an unemployment rate if 2022 of 3.5%. According to the forecast, GDP is expected to grow by 2.8% in 2023, and by 3.5 percent in 2024. The inflation rate in the coming 4 quarters (ending in the fourth quarter of 2023) is expected to be 3.0%. The inflation rate in 2024 is expected to be 2.0% (Bank of Israel).

Israel enjoys a strong entrepreneurial culture which nurtures and develops new ideas, making Israel a technology powerhouse. Israel has a high density of start-ups and many of the major technology companies, such as Google, Microsoft and Motorola, have R&D centres in Israel.

Many factors contribute to the success of Israel’s technology industries including: co-operation between academia and business through university Technology Transfer Offices, the ability to commercialise from the defence industries to the civilian market, an entrepreneurial start-up spirit coupled with a powerful VC community, and a highly skilled and motivated workforce.

Israel’s total number of patents granted positions it first place world-wide in patents per capita, and number 4 in the world in the absolute number of patents approved. The UK-Israel Tech Hub, based at the British Embassy in Tel Aviv, can provide further information on Israel’s tech and innovation sectors.

Israel’s armed forces occupied the West Bank, the Syrian Golan Heights and the Gaza Strip (along with the Sinai Peninsula) in 1967. Israel subsequently withdrew from Sinai in 1982 and from Gaza in 2005, but has formally annexed East Jerusalem and the Golan Heights. This has not been recognised by the international community, including the British Government, which considers all territory captured by Israel in 1967 as occupied and the status of Jerusalem as the capital of Israel as subject to negotiations with the Palestinians.

1.1 Domestic

Israel is a robust democracy with a free media (although subject to military censorship) and a well-functioning legal system.  Israel had 5 elections in 3 years, the last taking place on 1 November 2022. The government is comprised of 6 parties: Likud (32), Religious Zionism (7), Otzma Yehudit (6), Noam (1), Shas (11), and United Torah Judaism (7).

In its first few weeks, the governing coalition announced proposals to introduce sweeping changes to Israel’s judicial system. These have resulted in some concern from Israel’s Chief Economist that any reform which passes without broad consensus may have a detrimental effect on Israel’s economic growth these include:

1. International credit ranking agencies take into account governance and those institutions as a parameter when ranking countries. As such this may lower that parameter for Israel. This would increase the government’s cost of debt and hinder public spending. This is something that is not only speculation but has been commented on by international credit ranking agencies.

2. Impact on the hi-tech sector which is particularly vulnerable to credit changes as it requires international financing, is strongly anchored to its international reputation, with a buoyant market with skills in high demand which results in a mobile work force. The sector is 17% of the Israel GDP, 50% of exports, and 25% of income tax revenue from salaries. Not include ‘exits’ (sale of the company internationally), they estimate this at 12B USD.

2. Business and Human Rights

2.1 Settlements

The UK has a clear position on Israeli settlements: The West Bank, including East Jerusalem, Gaza and the Golan Heights have been occupied by Israel since 1967. Settlements are illegal under international law, constitute an obstacle to peace and threaten a two-state solution to the Israeli-Palestinian conflict. We will not recognise any changes to the pre-1967 borders, including with regard to Jerusalem, other than those agreed by the parties.

There are therefore clear risks related to economic and financial activities in the settlements, and we do not encourage or offer support to such activity. Financial transactions, investments, purchases, procurements as well as other economic activities (including in services like tourism) in Israeli settlements or benefiting Israeli settlements, entail legal and economic risks stemming from the fact that the Israeli settlements, according to international law, are built on occupied land and are not recognised as a legitimate part of Israel’s territory. This may result in disputed titles to the land, water, mineral or other natural resources which might be the subject of purchase or investment.

UK citizens and businesses should be aware of the potential reputational implications of getting involved in economic and financial activities in settlements, as well as possible abuses of the rights of individuals. Those contemplating any economic or financial involvement in settlements should seek appropriate legal advice.

In order to enable consumers to make a more fully informed decision concerning the products they buy that, in December 2009, the Department for Environment, Food and Rural Affairs (Defra) introduced voluntary guidelines to enable produce from Israeli settlements in the Occupied Territories to be specifically labelled as such.

On 24 March 2016, the United Nations Human Rights Council (UN HRC) adopted Resolution 31/36. The resolution included a requirement that the Office of the United Nations High Commissioner for Human Rights (UN OHCHR) create a database listing all business enterprises involved with/operating in the settlements. The UK has made clear its opposition to this database initiative. Nonetheless, the UN OHCHR issued a report on business enterprises involved in certain activities relating to settlements in the Occupied Palestinian Territories on 12 February 2020, in response to UN HRC Resolution 31/36. A small number of British business enterprises were named in the report.

Since 2005, products produced in Israeli settlements located within the territories occupied by Israel since 1967 are not entitled to benefit from preferential tariff treatment upon entry into the United Kingdom. This approach is maintained under the UK-Israel Trade and Partnership Agreement, which came into force on 1 January 2021. The United Kingdom published a Notice to Importers, on 1 January 2021, concerning imports from Israeli settlements into the United Kingdom, including a list of non-eligible locations.

The United Kingdom (2009) and European Union (2014) introduced guidelines outlining how products originating from the territories occupied by Israel since 1967 should be labelled in order to comply with UK and EU legislation, and so as not to mislead the consumer. This guidance states that produce originating from Israeli settlements, located within the territories occupied by Israel since 1967, should be specifically labelled as such. The UK’s approach following the end of the UK-EU transition period remains in line with this approach.

3. Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation operating a business in the UK can be liable for the conduct of a person who is neither a UK national nor resident in the UK, or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

In terms of the perceived level of public corruption, Transparency International’s Corruption Perceptions Index ranked Israel 31st out of 180 countries in 2022.

Israel recently ratified the OECD Convention on Combating Bribery of Foreign Officials in International Business Transactions. In July 2008 an amendment to the Israeli Penal Law incorporated the offence of bribery of a Foreign Public Official (Section 291A to the Israeli Penal Law 5737-1977). The offence prohibits bribery of a foreign public official for the purpose of obtaining, assuring or promoting a business transaction, directly or indirectly.

An individual who commits such an offence may face criminal prosecution in an Israeli court of law. In the case of a corporation, the corporation itself, as well as the individuals involved, may face criminal prosecution.

Visit the business anti-corruption portal page providing advice and guidance about corruption in Israel and some basic effective procedures you can establish to protect your company from them.

Read more about bribery and corruption.

4. Terrorism threat

For the latest advice on the risk of terrorism in Israel, please see the Foreign, Commonwealth & Development Office travel advice.

5. Protective security advice

In general Israel is considered a safe place to do business and foreign business people are warmly welcomed.

For the latest travel and security advice, please see the Foreign, Commonwealth & Development Office’s travel advice. The Centre for the Protection of National Infrastructure also provides protective security advice to businesses.

6. Business environment

In 2020 Israel ranked 35th on the World Bank’s Ease of Doing Business index, 28th for starting a business, 29th for resolving insolvency, 48th for obtaining credit (WB). The government has published guidance (PDF, 125 KB) to public authorities prohibiting procurements boycotts against Israeli firms or firms which trade with Israel. Guidance (PDF, 150 KB) to councils has also been published prohibiting similar pension investment boycotts.

7. Intellectual Property

In Israel intellectual property rights fall under the aegis of the Ministry of Justice. Information is on the Ministry’s website.

7.1 Copyright

Israel grants copyright protection to original literary, artistic, dramatic and musical works, as well as sound recordings and computer programs. Israel is a member of the Bern Convention on the Protection of Literary and Artistic Works and the Universal Copyright Convention and is also a signatory to the TRIPS Agreement. Accordingly, Israeli copyright law provides protection for foreign works in accordance with the provisions of these conventions. Israel’s updated Copyright Act came into effect in May 2008.

7.2 Trademarks

Trademarks may be registered in Israel through the Patent and Trademarks Authority. The registration process entails filing of an application, payment of filing fees, examination by the Authority, publication, and possibly opposition. A valid registration accords the owner the exclusive right to use the trademark in respect of the goods or services for which it was registered. Under Israeli law, a trademark registration is valid for 10 years from the date of the trademark application. The registration may be renewed for further periods of 10 years each. Israel is a member of the Madrid Protocol; legislation implementing its provisions has been enacted accordingly, allowing for the filing of international trademark applications in Israel.

7.3 Patents

The Israeli Patent Authority grants patents for inventions which are new, useful, non-obvious and include an inventive step. Patents are available for products or processes in any field of technology. The term of patent protection is 20 years from the date of application.

Useful facts about patent filing in Israel:

• official languages: English and Hebrew
• average duration of a pending application: 3 to 5 years
• international agreements: Israel is a member of the Paris Convention and a member of the PCT (Patent Cooperation Treaty)
• opposition to applications: following examination patents are published in the official Israeli Patent Journal and a 3 month opposition period commences. If no opposition is filed/and as long as any opposition is rejected, a patent will be granted

7.4 Designs

Design protection is available in Israel for original, previously unpublished designs of objects. Protection is granted for 5 years and may be renewed for 2 further terms of 5 years, for a total of 15 years. Design protection is important as Israel’s copyright law denies copyright protection for the design elements of industrial articles.

8. Organised crime

Organised crime is unlikely to affect business visitors to Israel.

9. Contact

Contact the Department for Business and Trade (DBT) team in Israel for further information.

Email: DBTIsrael@fcdo.gov.uk

10. Useful links

• exporting to Israel guide
• proof of origin
• export procedures
• trade with Israel guidance