Ferry company P&O is taking legal action against the government over a £33m settlement paid to Eurotunnel following the unravelling of a heavily-criticised Brexit contingency plan.

The plan involved the government awarding a contract to Seaborne Freight to provide additional capacity at Ramsgate Port to ease the presssure on the Port of Dover in the event of a no-deal Brexit.

The contract was awarded without a standard procurement process that would have meant other operators being able to bid for the work.

The DfT said that it was necessary to act quickly because of the Brexit timetable but within weeks the contract was pulled after Seaborne Freight's backers withdrew.

It also emerged that Seaborne had no ferries itself.

In the aftermath, Eurotunnel started legal proceedings against the DfT on the grounds that there should have been an open competition.

Before the case came to court, the government reached a settlement and paid £33m to the operator.

The government stressed at the time the money would go towards upgrading Eurotunnel’s facilities.

Now the government faces another legal challenge - this time from a rival ferry company P&O.

A company spokesman said: “We have repeatedly made clear during decades of providing vital transport services between Britain and the continent that we are happy to compete with other providers on a level playing field.

"We do not believe that the payment of £33m of public money to Eurotunnel to settle its legal challenge to these plans is fair or reasonable.

"It is explicitly designed to be invested in the tunnel's infrastructure and if left unchallenged would put our services at a competitive disadvantage.”

A Department for Transport spokesman said:“We are confident we acted appropriately in reaching the agreement with Eurotunnel."

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