Smith is redeveloping its site at Hull to handle expansion of its wound healing, casting and support businesses to serve growing markets, principally in Japan, Germany and the US.
Nicholas Hildyard, managing director, said it was the largest single capital investment in the company's history. It will be financed out of cash and future profits. The investment, stretched over three years, includes a pounds 2.65m DTI grant.
Mr Hildyard estimated that over five to six years the project would add 10 per cent a year to the medical division's annual sales of pounds 300m. Analysts said the company would need to address its capacity problems if it was to expand in Japan and the US.
Two-thirds of products made in Hull are exported, and by 1996 this figure should rise to 85 per cent.
Last month the company announced interim pre-tax profits on continuing operations up 19 per cent to pounds 82.2m on sales of pounds 489m. Smith took the entire cost of a pounds 148m loss on the sale of Ioptex, its US lenses maker, at the half-year.Reuse content