The UK government has been forced to shelve its legislation to hand the Chagos Islands to Mauritius, after the US dropped its support for the agreement.

On Friday, UK government officials acknowledged that they had run out of time to pass legislation within the current parliamentary session, which ends in the coming weeks.

The latest setback in the UK’s push to hand the Chagos Islands to Mauritius, which hosts a joint US-UK Diego Garcia military base, is a sign of the worsening US-UK relations after Donald Trump’s heavy criticism of Keir Starmer over his handling of the Iran war.

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.”

The US president has previously criticised the plan, which is backed by the US state department, telling Starmer he was “making a big mistake” by handing sovereignty of the islands to Mauritius in exchange for the UK and US being allowed to continue using their airbase.

However, earlier in February Trump had described it as the “best” deal the prime minister could make in the circumstances. The US president also endorsed the handover when Starmer visited the White House last year.

Under the deal, the UK would cede sovereignty of the Chagos Islands to Mauritius, and lease the largest island of the archipelago, Diego Garcia, for 99 years to continue operating the joint military base there.

The US had not formally exchanged letters to amend a 1966 British-American treaty on the islands that is understood to have forced the UK to drop its bill.

Now, a new Chagos bill is not expected to feature in the king’s speech in May, where the government’s agenda for the coming parliament is revealed.

Kemi Badenoch, the Conservative leader, said on X that the time the Labour government took to drop the bill is “another damning indictment of a prime minister, who fought to hand over British sovereign territory and pay £35bn to use a crucial military base which was already ours”.

Simon McDonald, a former permanent secretary at the Foreign Office, told BBC Radio 4’s Today programme that the government had “no other choice” than to halt the deal for the time being.

“The UK had two objectives, one was to comply with international law, the second was to reinforce the relationship with the United States,” he said. “When the president of the United States is openly hostile, the government has to rethink, so this agreement, this treaty will go into the deep freeze for the time being.”

The Chagos Islands are officially known as British Indian Ocean Terrority and have been controlled by the UK since the 19th century. In 2019, the international court of justice found that the UK unlawfully separated the islands from Mauritius before it granted independence to the country in 1968. Thousands of islanders were then forcibly deported to make way for the US-UK military base.

However, many Chagossians and their descendants would prefer the UK to retain sovereignty over the islands, in the hope they can one day return.

The Reform UK leader, Nigel Farage, said: “This is great news and long overdue. Now the government must right a terrible wrong and help the Chagossians to fully resettle their home.”

The Liberal Democrat foreign affairs spokesperson, Calum Miller, said the handling of the Chagos deal had been “shambolic”. Miller said: “Any deal must provide clarity on the future military partnership with the US and address Chagossian rights and parliamentary scrutiny of the sums involved.”

In February, the Guardian reported Trump changed his mind on supporting the deal because the UK would not permit its airbases to be used for a pre-emptive US strike on Iran.

Last month, Iran launched two missiles at the joint military base after warning British lives were in danger because Starmer authorised the US to carry out further strikes from British bases.

At the time, Hamish Falconer, a Foreign Office minister and former diplomat, had told MPs that discussions with American counterparts were paused and that the process through parliament in relation to the treaty would be brought back at an appropriate time.

Starmer has allowed US forces to use UK bases, such as Diego Garcia, only for defensive missions against Iran. This month, he faced increased pressure to limit access after Trump threatened “a whole civilisation” would die if Iran ignored his demands, before a ceasefire was later agreed.

In an effort to contain the confusion surrounding Falconer’s comments, the Foreign Office said there was no pause or set deadline, and timings would be announced “in the usual way”.