Challenge was the last steam tug to serve on the River Thames, spending her entire working life based on the river. A notable event in her career was her participation in the evacuation of the Allied Army from Dunkirk in May and June 1940. As part of the armada of Little Ships, she contributed to the rescue of some of the 338,000 servicemen trapped by the advancing German forces.

Upon returning to the Thames, Challenge was equipped with a flying bridge to mount an Oerlikon cannon and a fore-bridge for two Lewis guns. Her wartime duties included towing the Maunsel towers out to the Thames Estuary, which formed the frontline defense against invasion. She also towed components of the Mulberry harbour, which played a crucial role in the success of the D-Day landings.

In 1944, Challenge sustained extensive damage when a V1 flying bomb exploded in the water nearby, igniting several fires. Despite this, she survived, and some shrapnel holes remain visible to this day. After the war, she continued in service. In 1950, Challenge, along with other vessels involved in the Dunkirk evacuation, returned to Dunkirk where crew members participated in a march past as representatives of all tug crews who took part in the evacuation.

In 1954, Challenge rescued three survivors from the steam tug Cervia after it capsized. Cervia had been towing the P&O liner Arcadia, which proceeded ahead before Cervia had dropped the tow, resulting in the tug being girted and the loss of six crew members. (The Cervia is now preserved in Ramsgate.) Challenge was converted to oil firing in 1964.

In 1974, just one week before she was due to be scrapped, Challenge was sold to the Taylor Woodrow Group. She then joined a collection of historic Thames vessels at St. Katherine's Yacht Haven, where she remained moored near Tower Bridge for the next 19 years. By 1993, the vessel had deteriorated significantly and faced scrapping until the Dunkirk Little Ships Restoration Trust intervened. Established only months earlier, the Trust aimed to save Dunkirk Little Ships at risk of destruction.

With support from Sun Tugs and the Port of Tilbury, Challenge was relocated to Tilbury Docks, where restoration work began. The restoration has been carried out by a dedicated team of volunteers, including young people participating in the Duke of Edinburgh's Award scheme, fulfilling the Trust’s educational objective to teach skills necessary for vessel maintenance and rebuilding.

Significant progress was made during restoration: the boiler was fired for the first time in December 1994, and on 19 January 1995, 21 years after last moving under her own power, Challenge successfully completed her first manoeuvring tests in Tilbury Dock. The foredeck was re-plated, the steam winch overhauled and reinstalled, and all machinery was refurbished and fully operational. Much of the electrical wiring was replaced.

Accommodation improvements were also undertaken to support volunteers who traveled from afar. Toilet facilities were expanded to include two toilets with showers and running hot and cold water. The galley was refurbished and equipped for catering, and the accommodation areas were cleaned, painted, and fitted with central heating to prevent frost and condensation damage. Additionally, British Telecom donated two telephone poles, which were adapted to replace the masts.

In May 2004, Challenge attended the Dordrecht Steam Festival, followed by the Brest Festival of the Sea in July, where she was well received and featured on French television. In May 2005, she participated in the Association of Dunkirk Little Ships cruise to Dunkirk to commemorate the 65th anniversary of the evacuation, under the command of Sir Robin Knox-Johnson, Vice President of the Dunkirk Little Ships Restoration Trust.

In June 2005, Challenge was invited to the International Fleet Review at Spithead by Her Majesty the Queen and subsequently attended the International Festival of the Sea in Portsmouth. In 2006, a major refit commenced, including refurbishment of the tail shafts and bearings, realignment of the main engine bearings, and an extensive boiler overhaul.

As of 2009, Challenge remained under refit at Shoreham-by-Sea. Preparatory work included dry docking to remove the propeller and shafting for assessment.

Ownership History

• 1931–1965: Elliott Steam Tug Co.
• 1965–1968: William Watkins Ltd.
• 1968–1974: London Tugs Ltd.
• 1974–1993: St. Katherine Haven Ltd.
• 1993–present: Dunkirk Little Ships Restoration Trust

Challenge has undergone substantial overhaul following a Heritage Lottery Fund grant awarded to the Trust. Further work and ongoing maintenance are required to restore Challenge to prime condition.