The beleaguered transport secretary, Chris Grayling, is under mounting pressure to resign after reaching a humiliating £33m out-of-court settlement over a botched Brexit ferry deal.

The deputy Labour leader, Tom Watson, said “heads must roll” after the latest chapter in the fiasco, in which the startup company Seaborne Freight was awarded a £14m contract to open a new UK-EU ferry route for emergency medical supplies in the event of a no-deal Brexit, even though it had no ships and no port contract.

Watson said of the settlement on Friday: “This is a scandalous, needless, reckless waste of public money caused by the Tories’ gross failure in Brexit negotiations and their botched effort to prepare for the disastrous folly of a no deal – which shouldn’t even be on the table.

The government reached the £33m agreement with Eurotunnel just hours before a four-day trial was due to start, threatening to heap more embarrassing revelations on Grayling.



On Friday, Labour claimed that decisions made by Grayling in various government departments had cost the taxpayer £2.7bn, including £2bn on the cancellation of Virgin’s East Coast rail franchise and £800,000 on consultants’ fees to assess the viability of Seaborne.

The shadow transport secretary, Andy McDonald, said: “[Grayling’s] 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.”

He pointed out that the settlement came on the same day that a National Audit Office report showed “disastrous decisions by Chris Grayling at the Ministry of Justice have wasted nearly half a billion pounds of public money”, and two days after a public accounts committee report detailed his “mismanagement” of the railways.

Downing Street insisted Theresa May continued to have confidence in Grayling. A No 10 spokesperson said the minister was involved in “some very important projects and work, including massive investment in the railway network and in securing backing for a third runway for Heathrow”.

Grayling was being sued by Eurotunnel for allegedly breaching public procurement rules over its contract with Seaborne and two other ferry firms to provide freight capacity for emergency medical supplies in the event of no deal.

Grayling said he was disappointed Eurotunnel had taken him to court over contracts to “ensure the smooth supply of vital medicines” in the event of no deal, but that the £33m agreement would help ensure the NHS now had those medicines.

Under the agreement, Eurotunnel will “improve security and traffic flow at the border”, including investing in improved access to the UK terminal, in exchange for dropping the court case.

Grayling’s decision to award the contract attracted criticism and ridicule after it emerged that Seaborne had no ships and no contract with the port of Ramsgate, and that the original terms and conditions on its website appeared to have been cut and pasted from a food delivery firm.

Grayling was accused on Monday of trying to conduct large parts of the trial in private, against the principle of open justice. The hight court judge ordered Grayling to return by the close of business on Thursday with justification for keeping up to 10,000 documents relating to the contracts private.

It is believed the case was settled out of court on Thursday afternoon and all files now remain sealed and unavailable for press or public scrutiny.

The government said in a statement: “As part of the agreement, Eurotunnel has also withdrawn its legal claim against the government, protecting the vital freight capacity that the government has purchased from DFDS and Brittany Ferries.”

Downing Street said the decision to settle out of court was a “cross-government decision” and had been taken “to ensure that vital goods would not be put into jeopardy in a no-deal scenario”. The settlement “allows us to continue at the job at hand”, including implementing measures to ease pressure at the border with France in the event of a no-deal Brexit, the spokesman said.

Eurotunnel said the settlement would “ensure that the Channel tunnel remains the preferred route for vital goods to travel between the EU and the UK”.



It added that under its deal with the government, “the development of infrastructure, security and border measures … will guarantee the flow of vehicles carrying urgent and vital goods and … will keep supply chains essential to both industry and consumers moving”.

Both sides said it would be wrong to describe the settlement as “compensation” but stressed it did not include a new contract for freight across the channel.

Eurotunnel, which has also dropped its case for a judicial review, has always maintained that the Department for Transport should have considered its services for no-deal contingencies, rather than a ferry route between Ramsgate and Ostend. The channel tunnel is the quickest route between the EU and the UK.

Last month, the DfT’s permanent secretary was forced to admit that it had verbal assurances rather than a written guarantee of secure financial backing before handing the contract to Seaborne.