A £100 million boost to university facilities announced in today's Budget is expected to spur on new research and forge closer links between academia and industry.
The cash injection of "new" money was warmly welcomed by Professor Eric Thomas, president of Universities UK and vice-chancellor of the University of Bristol.
He described the investment as "extremely good news for students, universities and business".
Details of how the money will be allocated will be decided at a later date.
The fund is designed to encourage universities to attract more collaboration and spending from private sector industries and research charities.
It will be aimed at large capital projects which lever in significant levels of private investment for cutting-edge laboratories and equipment.
Prof Thomas said: "The links between universities and business are already strong but this will kick-start new research projects, encourage innovation and bind universities and industry even closer together.
"Universities play a vital role in developing the UK's economy and this is just the kind of confidence-boosting project that our economy needs at this time."
It is hoped the £100 million from the Government will be at least doubled by private investment.
Universities and science minister David Willetts said: "Industry and universities have a vital role to play in collaborating to achieve sustained growth in our economy. We know from experience that targeted funding can be successful in attracting significant business investment to our university research base."
In another move, the Chancellor announced that £60 million will be spent on a new UK Centre for Aerodynamics to re-invigorate Britain's aviation industry.
The aim is to create a multiple site centre where "radical" new aviation concepts, such as unusual types of wing, can be designed and tested.
It is highly unlikely that such a facility would be created without public funding, the Government believes.
Despite having Europe's biggest aerospace industry, British aviation has suffered from under-investment in recent years.
The new centre is expected to help Britain capitalise on the huge demand for new aircraft. Over the next 20 years it is estimated that 27,000 new large aircraft worth almost £2 trillion will be needed. A huge potential future market also exists for unmanned aircraft.
Sir Paul Nurse, president of the Royal Society, said the Chancellor's announcements were helpful but not enough.
He said: "These things are very welcome but on their own they are only green shoots. In the UK, the Government and industry still invest a smaller percentage of our Gross Domestic Product in research and development than our competitor economies and while that remains the case we will not fulfil the Chancellor's goal of making the UK into Europe's technology centre.
"If we want science to improve our situation we must think bigger than our competitors in investing in the full range of science and innovation from discovery, through development and on to application."
His views were echoed by Imran Khan, director of the Campaign for Science and Engineering (CaSE).
He said: "Simply reversing cuts isn't going to be a game-changer for the UK. We need to be far more ambitious if we're serious about having a hi-tech future.
"The Chancellor should re-invest the windfall from the auction of 4G mobile spectrum, due later this year, into science and engineering.
"In his Budget statement the Chancellor noted that countries like China are powering ahead in the global economy, and lamented our export record in comparison to Germany's. He must see it is no accident that both of these nations are planning big increases in their research and education investment."
The boost to aviation was described as "important" by Graham Chisnall, deputy chief executive of ADS, the UK aerospace trade organisation.
Currently the UK holds 17% of the market share in aerospace. If this was maintained, future market predictions suggest it could be worth £352 billion to the UK between now and 2029, said Mr Chisnall.
"With the announced investment, aerospace will contribute even more effectively to the Government's growth agenda," he added.
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Full text of the Budget speech