Government was warned about Brexit ferry payouts

The government was warned last year that it would face a bill of up to £20m if sued over the procurement of no-deal Brexit ferry services, the National Audit Office has revealed.

It said the Department for Transport's (DfT) accounting officer thought there was a "high likelihood" of a challenge over the contracts with Brittany Ferries, DFDS and Seaborne Freight.

She also warned Eurotunnel could sue.

In March, the DfT agreed to a £33m settlement with the firm.

In response to the National Audit Office's (NAO) report, the government said it had "carefully considered the legal risk at all stages of the procurement".

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The Eurotunnel case was brought after the government handed out three contracts worth more than £100m in total to Brittany Ferries, DFDS, and Seaborne Freight in December.

These were to provide additional freight capacity on ferry services between Britain and mainland Europe in the event that a no-deal Brexit led to disruption at UK ports.

The awards were not subject to a full public procurement process, which the DfT said was justified by "reasons of extreme urgency brought about by events unforeseen by the contracting authority".

Transport Secretary Chris Grayling has faced criticism over the payouts

However, Eurotunnel challenged the government's handling of the spend, and began legal proceedings in January, seeking up to £80m in damages.

It claimed it had never been approached as a potential provider, despite having previously run a ferry service.

The Transport Secretary Chris Grayling previously called the company's decision to take legal action "disappointing".

The NAO report reveals that Mr Grayling's department was advised that while a procurement challenge was probable and "likely to be successful", any trial was unlikely to occur before the 29 March, the day Britain was scheduled to leave the EU.

It was also advised any disputes over the contracts would probably end in a payout of up to £20m.

In the event, Eurotunnel's case was expedited, forcing the DfT to pay out to protect its contracts for the delivery critical supplies in the event of a no-deal.

All three ferry contracts have since been terminated.

Seaborne Freight's £13.8m award was axed in February, after its backers pulled out, while DFDS and Brittany Ferries' deals were cancelled earlier this month, in a move that could cost the taxpayer up to £50m.

The government is also facing a challenge from P&O Ferries to its settlement with Eurotunnel. P&O is arguing that the £33m deal amounts to state-aid and is a breach of procurement law.