Seaborne Freight was awarded the £13.8m contract in December to run a freight service between Ramsgate and Ostend, Belgium, in the event that Britain leaves the EU without a deal.

The government was criticised for choosing Seaborne Freight, a company with no ships or trading history, and for leaving too little time to establish the new ferry service before the Brexit deadline of 29 March.

And local politicians in both Ramsgate and Ostend warned that the ports at both ends of the route will not be ready the deadline.

At the time, the government said it awarded the contract "in the full knowledge" that Seaborne, which was formed in April 2017, was "a new shipping provider" but said the company had been "carefully vetted".

On Saturday, the Daily Telegraph reported that Arklow Shipping, a major Irish shipping firm, withdrew its support from Seaborne "without warning".

The Department for Transport (DfT) said that it had become clear that Seaborne "would not reach its contractual requirements", after Arklow Shipping backed out of the deal.

A spokesman said: "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."

Thanet District Council - which covers Ramsgate - said it was "disappointing" that Arklow Shipping had pulled out of the deal. It said it was in talks with the DfT about the port's role "in terms of supporting Brexit resilience".

The council has been pumping money into the port to get it ready for ferry services. Earlier this week, it was considering cutting its budget for the port but, at the request of Mr Grayling, delayed its decision.

Ramsgate has not had a regular ferry service since 2013 and needs to be dredged before services can start.

'The last throw of the dice'

Following the news that Seaborne Freight had lost the contract, the Conservative MP for South Thanet, Mr Mackinlay, said ferry companies had "come and gone over the last few years" but "none of them have come to anything".

"For me, this Seaborne operation was potentially the last throw of the dice for a chance for commercial shipping out of Ramsgate," he said.

"Perhaps it is time that we turned the page on Ramsgate port being for commercial activity and we can start doing something rather more exciting on those acres of land, potentially a marina village, hotels, restaurants, some housing, something really exciting that I think would be more welcomed by many people in Ramsgate."

Andrew Gwynne, the shadow secretary of state for communities and local government, told BBC Radio 4's Today programme: "This is yet again another indication of a government that had no plan for Britain should we leave the European Union without a deal.

"It's another example of a major disaster in the hands of Chris Grayling who must be classed as the worst secretary of state ever."

The government said that no taxpayer money has been transferred to Seaborne.

It added that its confidence in the viability of the deal with Seaborne was based on Arklow Shipping's backing of the company and the assurances it received from them.

Source: BBC