Chris Grayling faces an estimated bill of up to £28m from two ferry companies hired to help cope with a no-deal Brexit if the UK does not leave the EU at the end of March.
The UK transport secretary agreed a £103m contract with three ferry companies in December to lay on extra services between Britain and mainland Europe if Britain crashes out of the bloc this month.
One of the groups — Seaborne Freight — has since lost its deal amid controversy about its ability to deliver ferry services, since it had no ferries. But the Department for Transport still has £89m contracts with DFDS and Brittany Ferries, two established companies, to provide more capacity in a no-deal Brexit.
However, the contract only applies to a no-deal Brexit at the end of March 2019.
Having failed to secure MPs’ backing for her Brexit deal this week, prime minister Theresa May now plans to ask the EU to postpone the UK’s departure date until at least June 30.
If the bloc grants her request, the government will need to rewrite the contracts.
The National Audit Office recently warned that the transport department would face a dilemma in such circumstances. “There is no provision for the start date to be delayed, but the department may seek to negotiate this with the operators,” it said.
Whitehall aides acknowledged that the two ferry companies would have the right to request millions of pounds of extra funding to lay on extra services at a different date.
One person familiar with the companies’ thinking said that an appropriate compensation would be about half of the cancellation cost for the contracts. Since the NAO estimates the contracts’ cancellation cost at £56.6m, that would amount to a £28m payout.
Brittany Ferries said that the two companies had already spent a significant quantity of money in recent months. “We have changed our schedules, paid port fees, the increased cost of fuel, extra staff and training.”
A spokesman for Mr Grayling said the department could have requested a more flexible contract in the first place but argued that would have cost more money in the first place. “It would have been the same either way,” he said.
Although MPs voted against no-deal Brexit this week it remains the default outcome later on if the UK government is unable to get an alternative plan through the Commons.
Mrs May has said that if her deal is not passed in another vote next week, the country will seek a much longer extension until after June 30 — but warned that this would involve taking part in May’s elections to the European Parliament, a prospect many UK politicians find deeply unpalatable.
As a result, some businesses and politicians fear that June 30 could replace March 29 as the date of a possible no-deal Brexit.
Andy McDonald, shadow transport secretary, said the possible charges for changing the ferry companies’ contracts were further proof of the government’s “incompetent” handling of no-deal preparations.
“Chris Grayling bypassed ordinary procurement rules to award these contracts, one of which has already been cancelled at significant cost to the taxpayer,” the Labour MP said. “The entire Brexit process has been characterised by uncertainty, so it is shocking that the government failed to include a provision to delay the start date in these contracts.”
Last month Eurotunnel, the owner of the Channel tunnel, dropped a legal claim against the government’s ferry contracts — which alleged “distortionary and anti-competitive” behaviour — in return for a payment of £33m.