Ministers are racing to finalise a £1.25bn deal with Tata Steel, the owner of Britain’s biggest steelworks, amid fading hopes of a similarly consensual agreement with the industry’s second-largest player.

Sky News understands that Jonathan Reynolds, the business secretary, wants to make a statement to parliament on Wednesday about the Tata Steel deal after Prime Minister’s Questions.

Mr Reynolds said in the aftermath of Labour’s general election victory that “a better deal” was possible than the one negotiated by the last government and announced earlier this year.

That involved £500m being handed to Indian-owned Tata Steel to aid Port Talbot’s transition to a more environmentally friendly electric arc furnace.

In return, the company would invest £750m, but nearly 3,000 jobs would disappear.

Industry sources said that redundancy terms and retraining programmes for affected workers were among the final points being negotiated between Tata Steel and the government.

However, the £500m grant is expected to remain largely unchanged, and it was unclear what, if any, job guarantees Tata Steel would provide.

Mr Reynolds had indicated in July that such guarantees would form an essential part of any government.

One source said Tata Steel would also offer a commitment to increasing its own investment in Port Talbot subject to the future business case for doing so.

A person close to the talks said on Monday that a final deal had yet to be struck and that the details remained subject to change.

A Department for Business and Trade spokesperson said: “Steel is vital for a vibrant, secure economy.

“Our steel sector needs a government working in partnership with trade unions and businesses to secure a green steel transition that’s both right for the workforce and delivers economic growth.

“Decarbonisation does not mean deindustrialisation, and we will be working to safeguard jobs as part of these negotiations, securing the future of steelmaking communities for generations to come. “

A separate agreement with Jingye Group, which owns the Scunthorpe-based British Steel, continues to elude Whitehall amid uncertainty over the company’s ultimate demand for financial support.

Reports last week suggested that Chinese-owned British Steel was preparing to bring forward the closure of its two blast furnaces to December, a move that will also threaten thousands of jobs.

Mr Reynolds is expected to use his parliamentary statement to outline the wider importance of steelmaking to the UK economy but will not be formally publishing the government’s steel industry strategy on that day, according to one insider.

His statement is likely to set the steel industry in the context of the new government’s broader industrial strategy, they added.

Labour said in its election manifesto that it would establish a £2.5bn green steel fund, with the £500m Tata Steel subsidy in addition to that.

Tata Steel declined to comment.