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The Government is reportedly in advanced talks with Tata Steel to provide a £500 million funding package aimed at safeguarding the long-term future of a key part of Britain’s steel industry. The deal would secure £1 billion for the group’s Port Talbot steelworks but could lead to as many as 3,000 job losses, according to Sky News.

Under draft plans, the Government would commit approximately £500 million of public funding, while Tata Steel’s Indian parent company would agree £700 million of capital expenditure over a multi-year period, the report said. The company would reportedly commit to building electric arc furnaces, which offer greener, less labour-intensive ways of producing steel than traditional blast furnaces.

Industry sources close to the negotiations told Sky that as many as 3,000 of the company’s staff based in the º£½ÇÊÓƵ could lose their jobs. Port Talbot employs around 4,000 workers. However, as Port Talbot has an ageing workforce a number of those could be through workers taking early retirement.

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A Tata Steel spokesman said in a statement issued to Sky News: “Tata Steel is continuing to discuss with the º£½ÇÊÓƵ Government a framework for continuity and decarbonisation of steelmaking in the º£½ÇÊÓƵ amidst very challenging underlying business conditions, given that several of its heavy-end assets are approaching the end of life.

“Given the financially constrained position of our º£½ÇÊÓƵ business, such significant change is only possible with Government investment and support, as also seen in other steelmaking countries in Europe where governments are actively supporting companies in decarbonisation initiatives.”

Last July, Tata Group chairman Natarajan Chandrasekaran said action to close its º£½ÇÊÓƵ operations would be taken in 12 months if a financial support package from Westminster was not forthcoming.

It has been reported that Tata would need around £3bn in capital expenditure to decarbonise its Port Talbot operations. The steelmaker has previously called on the º£½ÇÊÓƵ Government to provide £1.5bn to help it achieve this goal, the same level of funding being awarded to steelmakers in Europe. German steelmaker Salzgitter has secured €1bn (£866m) from the German Government to support its decarbonisation efforts.

Unite general secretary Sharon Graham criticised the reported plans and said the union would be “mounting a significant campaign” to protect jobs.

“This Government could make us the green steel capital of Europe – instead they are choosing to follow a job cuts agenda,” she said. “Unite will leave no stone unturned in the fight for jobs. We will now be mounting a significant campaign on this issue and we fully expect the Labour Party to make a serious commitment to a better future for º£½ÇÊÓƵ Steel.”

Tata Steel, the Treasury and the Department for Business and Trade have been contacted for comment.