The other posts are absolutely correct from a political standpoint, it likey being driven by lobbying. As well as that though that there were a couple of big incidents that led the government to feel they could justify the proscription.

In 2024 Palestine Action broke into an Elbit factory and ended up in a tussle with the police where one of them hit a police officer from behind with a sledge hammer, fracturing her spine (she’s back at work on light duties)

In 2025 Palestine Action broke into a military base and painted (government would say damaging) some of the aircraft.

They were labeled as a terrorist organisation just after the second.

I’m probably in a bit of a left wing bubble living in a major city but, anecdotally, most people I know seem to think you should expect some punishment/jailtime for breaking into a military base, but its just an abuse of power to label them terrorisds. It doesn’t feel like a very popular decision and every video of the police arresting grannys reinforces that.