The government has been forced to pay out £33 million to settle a court case over his Brexit ferry contracts.

The Government agreed to pay Eurotunnel the eye-watering fee after they were accused of a “secretive” process of handing out no-deal contracts to ferry firms.

It comes after one of the contracts, with Seaborne Freight, a ferry company who owned no ferries, dramatically collapsed, causing embarrassment for the government.

But Theresa May has refused to sack hapless Transport Secretary Chris Grayling despite his role in the process.

A Number 10 spokeswoman said the Prime Minister has full confidence in Mr Grayling’s abilities as a minister.

Last year the Department for Transport contracted three suppliers – Brittany Ferries, DFDS and Seaborne Freight – to provide additional freight capacity for lorries at ports other than Dover.

The plan was to guard against no-deal Brexit leading to congestion on roads down to the coast.

In documents outlining the agreements, the DfT stated that an "unforeseeable" situation of "extreme urgency" meant there was no time for the contracts to be put out to tender.

Seaborne Freight, which had no ships and had never run a ferry service, has already had its contract cancelled after the Irish company backing the deal pulled out.

Transport Secretary Chris Grayling came under huge criticism for the deal, which would have been worth £13.8m.

Eurotunnel wrote to Mr Grayling in January to complain that it had not been considered when the contracts were awarded.

It argued that it has run a cross-Channel ferry service (MyFerryLink, which closed in 2015).

Brexit Secretary, Stephen Barclay, said: "Our focus is firmly on delivering a deal but it is important we prepare for all scenarios.

"We are taking steps to ensure supply chains continue to function, whatever the circumstances of our departure, and that mitigation is in place to avoid disruption at borders." 

Transport Secretary, Chris Grayling, said: “The agreement with Eurotunnel secures the Government’s additional freight capacity, helping ensure that the NHS has essential medicines in the event of a no deal Brexit. 

“While it is disappointing that Eurotunnel chose to take legal action on contracts in place to ensure the smooth supply of vital medicines, I am pleased that this agreement will ensure the Channel Tunnel is ready for a post-Brexit world.”

But pro-Remain campaigners have slammed the government’s handling of the situation and Labour have called for Mr Grayling to go.

Andy McDonald MP, Labour’s Shadow Transport Secretary, said: “On the same day a National Audit Office report highlights that disastrous decisions by Chris Grayling at the Ministry of Justice have wasted nearly half a billion pounds of public money we also learn that the Transport Secretary’s misjudgement over the award of a ferry contract has left taxpayer’s liable for £33 million in compensation to Eurotunnel.

“This follows a damning Public Accounts Committee report on Wednesday on his mismanagement of the railways.

“His conduct as a minister is one of serial failure and routine incompetence. In any other sphere of life he would have been sacked long ago. I say yet again: this trail of destruction has gone on long enough. It’s time for Chris Grayling to go.”

Best for Britain supporter Layla Moran MP said: "Another week, another example of why the transport secretary is called ‘failing Grayling’.

"Not satisfied with handing a contract to a ferry company with no ferries, he has now spent millions of taxpayers money to cover the fallout. 

"The transport secretary’s track record of failure is something to behold."

A Number 10 spokeswoman said:  “In terms of the Eurotunnel announcement, we took a decision to come to an out of court agreement to ensure that vital goods would not be put into jeopardy in a no-deal scenario.

"Our view is that a court case would have put at risk that extra vital freight capacity that we have secured already.

“The settling allows us to concentrate on the job at hand of continuing with our no deal contingency planning.”

The spokeswoman denied the case was settled out of court to prevent details of the contracts coming into the public domain.

“Absolutely not,” she said. “We conducted an accelerated, competitive procurement process to secure important freight capacity. We set out the reasons why we decided to settle out of court.”

She said the procurement process was accelerated in October in response to “revised assessments” of no deal Brexit and the impact it could have.

She said it was a “cross-government decision” to settle, and that under the agreement Eurotunnel committed to “implementing measures that will improve security and traffic flow at the border.

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