Chancellor Jeremy Hunt is said to be close to agreeing a £300m funding package for Britain’s second-biggest steel producer in a move that would save thousands of jobs.

British Steel has requested public money following an intervention by Grant Shapps, the Business Secretary, and Michael Gove, the Levelling Up secretary.

The funding would be “directly linked” to a project to replace British Steel’s blast furnaces at its Scunthorpe site with a greener electric arc furnace, according to Sky News.

It is understood that the deal will require Jingye Group, British Steel’s Chinese owner, to invest at least £1bn in the business by 2030 and make commitments relating to job retention.

If those conditions are not met, the Treasury could still decide not to proceed with the funding.

The fate of British Steel, which was bought by Jingye out of an insolvency process just under three years ago, has become increasingly unclear in recent months as the current owners have indicated that they would not maintain its operations without taxpayer funding.

British Steel employs about 4,000 people, with thousands more jobs in its supply chain dependent upon the company.