Hi-tech hotspot of the North

Teesside's future is digital, as the university helps technology boffins to create cutting-edge businesses. Lucy Hodges reports

A fortnight ago, a symbolic clod of earth was dug out of the ground at Teesside University, marking the transformation of that part of North-east England from its industrial past to a hi-tech future. Goodbye mining, shipbuilding and heavy engineering. Farewell steel and chemicals. Hello computer games, animation and digital design.

It is difficult to imagine a more dramatic makeover for an area that lost much of its traditional heavy manufacturing base in the 1970s and 1980s. Two ultra-modern buildings are going up in the Victorian quarter of Middlesbrough on the edge of Teesside's campus as part of a £20m renewal project dubbed DigitalCity.

The first, a five-storey Institute for Digital Innovation, will serve as a hothouse for new ideas and exploring their commercial potential. It will offer space for technology companies that want to work alongside academic research staff. The hope is to create 300 jobs and 130 new companies by 2010.

The second is a Centre for Creative Technologies, a purpose-built teaching space for students studying digital design. It will provide studios, a workshop, a newsroom, broadcast news studios and multimedia studios for arts and media students. And it will offer computing students suites for computer animation, computer-game art, design and programming, visualisation, graphics programming and digital music.

It all capitalises on a strength Teesside University has been nurturing. For some time now, students interested in computer games and animation have been flocking to its niche courses. The university has set up an incubation unit in a former Victorian school on campus that houses spin-out companies. Funded with European and Regional Development Agency money, it contains a number of digital enterprises, including Seed Animation, Amazing Interactives and Yuzu, which specialises in web design. The idea is that these companies will relocate to DigitalCity when it is ready and they are strong enough.

For decades, the Americans have seen higher education institutions as engines of growth for local economies. That is now happening in Britain, as universities such as Teesside, egged on by the Government and regional agencies, take on a more energetic role in economic wellbeing.

"As a university, we do research that's about generating new ideas, but we also should be putting those ideas to use to create an economic base to fill the gaps left by shipbuilding, ICI and the like," says Professor Mike Smith, deputy vice-chancellor. "Middlesbrough was built on enterprise and came into existence because iron ore was found in the Cleveland Hills and the Durham coalfield was nearby. Now we have to find new ways to exist and compete in the modern world."

One motive in creating DigitalCity was to retain graduates in the area. Until now, Teesside alumni have hared off down the M1 to jobs in London. The hope is that, with a digital hotspot in Middlesbrough, students will stay. It is also expected that the cluster of companies will attract businesses and graduates to the region.

That's already happening. Nisai, a digital-based learning company that concentrates on helping people who are excluded from learning, such as those who are ill and bedridden, has relocated to Teesside from Hyderabad in India to tap the local graduate market. In Hyderabad, they would train staff only to find them pinched by other companies. Nisai employs about 40 Teesside graduates.

"If the economy of the area grows and it's an attractive place to come to, that's going to have an indirect effect on recruitment and the health of the university generally - and it contributes to social wellbeing," Smith says. "We are trying to generate a knowledge economy in the North-east of England, including in rural areas."

The success of one company suggests that Teesside should be on its way to creating a busy hub of activity by 2010. Strange Agency is run by Clive Fencott, who came to the university to do a PhD and ended up spinning out an enterprise to test and assess computer games. Strange Agency has eight staff (three part-time).

"It never occurred to me that this would make lots of money," Fencott says. "Having a business that would provide jobs for us was as big as my ambition got, but now our aim is to become a major player in the computer games industry."

Strange Agency was given £4,700 to develop its idea by the university's Enterprise Development Programme and was then lent a further £90,000 by a venture capital company. Fencott hired a graduate student at Teesside to help him, and for 18 months has been building a sophisticated piece of software in his office in the incubation unit. When I met him, Fencott was about to take off for an international electronic entertainment exhibition in Los Angeles, where he was hoping to sell his unique piece of kit.

But it is not just in computer games that Teesside is experiencing success. A film by two lecturers at the university won an international award for best animated film of 2005, beating the Wallace and Gromit blockbuster, The Curse of the Were-Rabbit. The film, Emily and the Baba Yaga, based on a Russian folk tale, had strong characterisation and was meticulously made, the judges said.

One way the university has been holding on to some of its most talented staff and students is through its DigitalCity Fellow programme. Last year Teesside had 49 fellows. "This enables us to nurture their talent and find out if they are able to work on an award-winning animation or another idea," says Janice Webster, DigitalCity's project director. "We bring in mentors to take them the next step to develop their business plan." Companies that get to this stage can find a home in the incubation unit. In 2004-05, the DigitalCity Fellows created nine companies. "This year our target is 10," Webster says.

A DigitalCity fellow, Sam Harrison, 26, is achieving some success with his company Animmersion, which offers virtual reality as well as animation. "We can produce things for games or 2D imagery or anything in between," Harrison says.

Recently, he managed to win a big job doing a prestige architectural visualisation in the Middle East. "We are planning to stay here because of the talent coming out of the university," he says.

The more graduates that can be persuaded to do the same, the more the university will realise its dream of helping to create a vibrant digital media and technology cluster in the Tees Valley. And that is good news for the North-east.