The government's Chagos Island deal has been pulled after US President Donald Trump branded it an "act of great stupidity".
Under the terms of the deal, Britain would cede sovereignty of the archipelago to Mauritius, but continue to lease the largest island, Diego Garcia - which hosts a joint US-UK military base.
Now the bill underpinning the deal has been pulled from the upcoming King's Speech, where the government's agenda for the coming parliament is revealed, it is understood.
The US president initially supported the agreement, but changed course in January and branded it "an act of great stupidity" during a dispute with his NATO allies over Greenland.
The British government stands by the deal and will attempt to persuade Trump to change his mind but has acknowledged that it cannot proceed without his backing, The Times has reported.
A government spokesperson said: "Diego Garcia is a key strategic military asset for both the UK and the US.
"Ensuring its long-term operational security is and will continue to be our priority - it is the entire reason for the deal.
"We continue to believe the agreement is the best way to protect the long-term future of the base, but we have always said we would only proceed with the deal if it has US support.
"We are continuing to engage with the US and Mauritius."
It comes after Mr Trump repeatedly criticised Prime Minister Keir Starmer for its stance on the war in Iran.
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The Conservative leader of the Opposition, Kemi Badenoch, branded the deal a "surrender" and said its "rightful place" was on the "ash heap of history".
In a post on X, formerly Twitter, she wrote: "That it took so long is another damning indictment of a prime minister, who fought to hand over British sovereign territory and pay £35 billion to use a crucial military base which was already ours."
(c) Sky News 2026: Chagos Islands deal pulled by government after Trump brands it 'act of great stupidity'
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