British transport minister faces calls to quit after Brexit ferry contracts cancelled

(Adds prime minister's spokesman comments)

LONDON, May 1 (Reuters) - Britain's transport minister was under fresh pressure to resign after the government stacked up a 50 million pound ($65 million) loss for cancelling contracts for extra ferries to bring in essential supplies in the event of a no-deal Brexit.

The decision to award the contracts has been a major political embarrassment after it emerged the government handed out a 14 million pound contract for extra ferries to a company that owned no boats and published terms and conditions on its website that appeared to be for a takeaway food business.

Then, the government was forced to pay a further 33 million pounds to settle a lawsuit brought by Eurotunnel, which complained that it was unfairly prevented from bidding on the ferry contracts, which were negotiated in secret.

The botched handling of the contracts led to transport minister Chris Grayling being nicknamed "failing Grayling" by local newspapers.

The contracts were originally awarded four months ago as part of the government's broader strategy to ensure Britain was not left without key supplies, with significant congestion forecast on the main freight route between Dover and Calais.

The government put its contingency plans on hold after European Union leaders agreed last month to push back the date of Brexit to as late as the end of October.

"Chris Grayling and the ferry contracts will evermore be a case study in ministerial incompetence," said Andy McDonald, the opposition Labour's transport spokesman.

"His career as a minister has left a trail of scorched earth and billions of pounds of public money wasted. This country cannot afford Chris Grayling."

Three firms were originally awarded contracts worth more than 100 million pounds. But one contract was cancelled a month later because of concerns about whether the company, which did not have any ferries, would be ready in time.

The government has now scrapped the remaining two contracts. This means the taxpayer faces a total bill of 83 million pounds for ferry services, which will never run, if the cost of the settlement with Eurotunnel is included.

A spokesman for Prime Minister Theresa May said she had confidence in Grayling.

"It is obviously important that as a responsible government we did make full preparations for leaving the European Union without a deal," the spokesman said.

"The freight capacity contracts are no longer needed and therefore been terminated. We have taken the decision now as it represents the best value for money for taxpayers."

But there remains a risk that the United Kingdom could still leave the EU without a deal if the government fails to pass its Brexit deal or if the EU fails to agree another extension to the talks to leave the bloc.

In a further twist, a rival ferry operator, P&O, said last week that it was preparing its own legal action amid claims that the payout to its rival Eurotunnel was unlawful. (Reporting by Andrew MacAskill and Elizabeth Piper; Editing by Guy Faulconbridge and Hugh Lawson)