This article is more than 1 year old

This article is more than 1 year old

A controversial no-deal Brexit ferry contract awarded to a firm with no ships has been cancelled by the Department for Transport after an Irish shipping firm that had been secretly backing the deal pulled out.

The decision by the transport secretary, Chris Grayling, to award Seaborne Freight a contract worth £13.8m had attracted widespread criticism and ridicule.

It was one of three firms awarded contracts totalling £108m in late December to lay on additional crossings from Ramsgate to ease the pressure on Dover when Britain leaves the EU, despite the company having never run a Channel service.

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The department said on Friday it had decided to terminate the contract after Arklow Shipping, which had backed Seaborne Freight, stepped away from the deal.

A DfT spokeswoman said: “Following the decision of Seaborne Freight’s backer, Arklow Shipping, to step back from the deal, it became clear Seaborne would not reach its contractual requirements with the government. We have therefore decided to terminate our agreement.

“The government is already in advanced talks with a number of companies to secure additional freight capacity – including through the port of Ramsgate – in the event of a no-deal Brexit.”

The contract was cancelled a day after Grayling contacted Thanet district council to ask it to postpone a budget that would have shut down parts of the port of Ramsgate for use by freight shipping.

Play Video 0:35 'Ludicrous': Corbyn ridicules Chris Grayling after Brexit ferry deal collapse – video

Keeping the site open is costing local taxpayers £7,224 a day, according to a local source, and the council – which has already spent months in fruitless negotiations with Seaborne – had proposed shutting it down to help balance the books.

The DfT persuaded the council to keep it open, claiming that talks with Seaborne were at an “advanced stage”, according to Paul Messenger, a local Conservative councillor.

He said the port was costing about £2m a year: “That’s why we haven’t got any road sweepers, that’s why we haven’t got any public lavatories.”

Questions remain about the viability of Ramsgate’s port for use post-Brexit. It can only accommodate ships up to 180 metres long, but modern ships are typically 230-250 metres to allow for the economies of scale that make them sustainable.

John Davis, a member of the Ramsgate Action Group, said: “You can’t run a double-decker bus service out of a single-storey garage on the side of a bungalow – that’s the problem.”

The government’s deal with Seaborne descended into farce at the beginning of January when it emerged that the company had copied and pasted the terms and conditions from what appeared to be a pizza delivery company on to its website.

Several weeks later, the transport select committee published correspondence with Grayling in which he brushed off a number of questions about the procurement process that had led to the contract with Seaborne, as well as allegations that the government may have acted illegally by failing to put the deal out to tender.

Grayling insisted last month that the Seaborne Freight contract was “not a risk”.

The DfT said it had been Arklow Shipping’s backing that gave it confidence in the viability of the deal, and that it stood by the due diligence carried out on Seaborne Freight.

It said no taxpayer money had been transferred to the company.

The shadow communities secretary, Andrew Gwynne, told BBC Radio 4’s Today programme: “It’s just another example of a major disaster on the hands of Chris Grayling, who actually must now really class as the worst secretary of state ever.”

Andy McDonald MP, the shadow transport secretary, said the cancellation had been foreseen by his party and could not go without consequence.

“Whilst Theresa May needs the few friends she has right now, we cannot have this incompetent transport secretary carry on heaping humiliation after humiliation on our country. He has to go.”

The Labour leader, Jeremy Corbyn, raised the “ludicrous situation” in a speech in Coventry on Saturday, saying: “Chris Grayling … claimed the government had ‘looked very carefully’ at Seaborne Freight before giving the company the contract, but apparently not carefully enough to notice that it didn’t have any ships. Chris Grayling does have form in other departments.”

Mick Cash, the general secretary of the Rail, Maritime and Transport union, said: “RMT has taken a number of protests over the fiasco of the government’s Brexit ferry contracts to both the Department for Transport and the ports, and [this] comes as no surprise to us.

“The whole exercise is a complete and utter shambles, with the government ignoring union calls on what needs to happen. Instead they are blundering on from crisis to crisis.”

A Department for International Trade spokesperson said: “Our priority is to avoid disruption to businesses as we leave the EU and more DIT staff have been allocated to no-deal planning.”