The tanker, Stena Immaculate, which carries jet fuel for the US military, was at anchor on Monday when it was struck by the smaller Solong, causing huge fires and explosions, releasing fuel into the sea, and potentially posing a danger to wildlife.
Neither vessel is now expected to sink, transport minister Heidi Alexander said in a statement after an earlier assessment had said the Solong was unlikely to remain afloat.
One crew member from the Portuguese-flagged Solong is assumed dead, maritime minister Mike Kane told parliament. Thirty-six people were brought ashore following the incident and no others remain missing, the coastguard said.
"We have arrested a 59-year-old man on suspicion of gross negligence manslaughter in connection with the collision," police said in a statement.
The ship's owner, Ernst Russ, said the arrested man was the ship's captain, or master. "The master and our entire team are actively assisting with the investigations," Russ said.
Aerial video on Tuesday showed a gaping hole in Stena Immaculate's hull, with fire damage along its length, although the flames that engulfed it after the collision appeared to have subsided.
Crowley, the US logistics group which operated the Stena Immaculate, said in a statement the fire onboard had greatly diminished with no visible flames.
The Solong appeared badly burned and smouldering. The coastguard said a one-kilometre exclusion zone had been placed around both vessels.
"... early indications suggest that both vessels are now expected to stay afloat and that the Solong can be towed away from the shore, and salvage operations can get underway," Alexander said after a meeting with the coastguard agency.
Owners of the Solong said the vessel was not carrying sodium cyanide, contrary to an earlier report from maritime data provider Lloyd's List Intelligence, which cited the local coastguard, but conservation groups said the environmental impact from the spillage of jet fuel could prove wide reaching.
The Solong owners said they were monitoring four containers which had previously been used to store sodium cyanide.
The surrounding area is home to large colonies of protected seabirds including puffins and gannets as well as a delicate coastal ecosystem.
Dutch marine provider Boskalis, appointed to salvage the Stena Immaculate tanker, said four ships carrying foam and extinguishing agents were heading to the scene.
Authorities are ready to deploy equipment to minimise pollution at sea, including spray dispersants for oil spills and containment booms, if required, the British government said.
The potential environmental impact remains under assessment.
Local MP Graham Stuart said most of the spilled jet fuel appeared now to have burned off and there was no sign of either ship leaking engine oil.
Authorities said the risk to public health was very low.
The operators of the vessels and maritime authorities have yet to offer an explanation of why multiple safety systems on board modern vessels failed to prevent Monday's collision.
Data from maritime analytics website MarineTraffic showed the 183m Stena Immaculate was anchored off Immingham, northeast England, when it was struck by the 140m Solong, which was en route to Rotterdam.
The Solong was sailing at cruise speed and close to the maximum of around 18-19 knots, shipping sources said, and the vessel had sailed through the same area on past voyages.
British Prime Minister Keir Starmer's spokesperson said there was currently no suggestion of "foul play".
The Stena Immaculate was carrying 220,000 barrels of jet fuel in 16 segregated cargo tanks, but it was unclear how much of it was spilled after at least one tank was hit, Crowley said on Monday.
While Britain's Marine Accident Investigation Branch will gather initial evidence, overall responsibility for investigating the crash lies with the US and Portuguese authorities, the flag states of the vessels.
