We got a tip off that Owen Smith will be the candidate to take on Jeremy Corbyn

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Owen Smith, MP for Pontypridd and Labour leader hopeful.

Owen Smith is emerging as the most popular choice among Labour MPs to stand against Jeremy Corbyn in the upcoming leadership contest.

Smith, who announced his candidacy last week, is little-known among party supporters compared to Angela Eagle, but is the preferred choice to stand as the "unity" candidate, sources within the party have told Business Insider.

Labour is holding its second leadership contest in as many years after MPs overwhelmingly backed a vote of no confidence against current leader Jeremy Corbyn last month.

The party is currently in the midst of a power struggle between supporters of the veteran socialist and those who regard him as unelectable, and want him replaced by a more moderate candidate.

"The consensus does seem to be forming around Smith," a parliamentary aide who wishes not to be named told BI over the weekend. Another source within the party claimed Eagle "could drop out" in the coming days to allow Smith to represent the anti-Corbyn vote alone.

Both Eagle and former shadow work and pensions secretary Smith represent the anti-Corbyn faction - referred to by some campaigners as the 'saving Labour' movement. However, having two candidates stand will weaken efforts to defeat the current Labour leader as the anti-Corbyn vote will likely be split between the pair.

With this in mind, Smith or Eagle dropping out in the coming days makes perfect sense, especially given the large amount of support Corbyn enjoys at grass roots level.

Smith's odds of becoming the next Labour Party leader are continually improving with bookmakers, too. The Lancashire-born MP has leapfrogged Eagle and is now the second-favourite to win the upcoming election, with his chances improving with each day that passes.

Smith has promised to make Labour a "credible" opposition once again by offering a "radical" but viable alternative to the Tory government. He pledged to take a tougher stance on taxation by raising the top income tax rate to 50p, and hinted at the possibility of backing a second referendum on the UK's EU membership.

Smith and Eagle are set to make their pitches to Labour parliamentarians in a Westminster hustings on Monday afternoon.

The rules for participating in the leadership election have been the source of great controversy. The party's chief administrative body, the NEC, ruled last week that Corbyn would automatically be on the ballot, however, members of less than six months must pay £25 in order to vote in the contest.

The result of the Labour leadership contest will be announced on September 24.