The owner of Irish Ferries has cancelled an order for a new ferry after financial troubles at the German shipyard where it was to be built.

Irish Continental Group revealed that a 20% deposit valued at €33 million had been returned as it was protected by third party guarantees.

The company had been due to pay the remaining 80% on delivery of the ship.

The disclosure came as ICG confirmed that it would maintain loss-making lifeline services to Ireland without government support.

But Irish Ferries has suffered a “significant reduction” in passenger traffic and forward bookings for what is normally the summer season for tourist travel.

Passenger numbers were down 60% and car volumes by 62% in the period between January 1 and June 6.

The company said: “The current level of uncertainty and the introduction of travel restrictions across the EU because of the Covid-19 pandemic has led to a significant reduction in current passenger traffic and forward bookings for what is normally the peak summer passenger season for ICG’s Irish Ferries services.

“It is very difficult to estimate the full year financial impact on the group, as the reduction in passenger revenue will be material.

“The severity of this reduction in passenger revenue is dependent on the duration and nature of travel restrictions particularly over the peak summer season.”

ICG hit out at the current Irish government position of asking people from Britain who visit Ireland to self-isolate for two weeks.

The policy is not consistent with that of the UK government which does not require people travelling to Britain from Ireland to self-isolate, it argued.

“In addition, there is nothing to stop people from Britain visiting Ireland by transiting via Northern Ireland without the requirement to self-isolate which is clearly anomalous. We have written to the Irish government on this issue,” the company added.

The group said in a trading update that it is in a strong financial position to weather the Covid-19 storm.