The government has agreed to pay Eurotunnel £33 million to settle a lawsuit over emergency ferry services in the event of a no deal Brexit.

The Department for Transport (DfT), led by Transport Secretary Chris Grayling, offered the contract to supply extra ferry services across the channel to three companies.

Eurotunnel sued the government for giving the contracts out in a "secretive" way. Ordinarily, government contracts are put out to tender, allowing companies to bid for them. But this process was not followed.

The contract was designed to provide extra freight capacity in the event of a no deal Brexit, which many believe could cause lengthy queues for lorries on the roads to coastal ports.

As part of the settlement, Eurotunnel agreed to make some improvements at its terminal.

The DfT awarded the part of the contract, worth an estimated £13.8m, to Seaborne Freight. However, shortly after it had been awarded, it emerged that Seaborne Freight did not own any ships and had never even operated a ferry service. It soon cancelled the contract after its backing company pulled out.

In a statement, Chris Grayling said: "While it is disappointing that Eurotunnel chose to take legal action on contracts in place to ensure the smooth supply of vital medicines, I am pleased that this agreement will ensure the Channel Tunnel is ready for a post-Brexit world."

Port of Ramsgate

Elsewhere, Thanet District Council has axed funding for the Port of Ramsgate, meaning the port will no longer be "ferry-ready".

The Seaborne Freight contract would have seen ferries operate between Ramsgate and Ostend in Belgium. Politicians at both ends warned that the route would not be ready in time for the Brexit deadline. But its cancellation has seen the local council scrap the port's funding.

Bob Bayford, the Conservative leader of the council, said: "The port has been held in a state of readiness for a potential ferry operator to come in, for the last five years.

"When we took control [of the council] a year ago I announced that this would be the last year we would carry on in that way, and if by the end of the year we didn't have a contracted ferry service then we would cease to keep the port ferry-ready."

In February, Mr Grayling asked the council to delay its decision on the port's funding while talks over the ferry route continued.