In the future, the region will benefit from an industry whose products are far removed from the ships, steel and coal upon which the North-East economy was built. John Dean reports.

WITH the decline of traditional industries such as shipbuilding and engineering, and the increasing fragility of steelmaking and chemicals, Teesside has been searching for a business sector in which to become internationally recognised.

It may have found it with an industry that is as far from the past as can be imagined.

The new hope is offered by plans to develop locally-made advances in digital technology, some of which are leading the world.

Two of the organisations behind the revolution are the University of Teesside and Codeworks, regional development agency One NorthEast's programme to develop a regional centre for excellence in digital technology. The initiative taps into work already going on at the university, work that has seen the emergence of vibrant new talent.

At the heart of the revolution is the constant advances in computer technology which, at the university, is being used for everything from animated films and computer games to on-screen building sites that help developers solve logistical problems.

The university is pulling the work together as part of its Digital City programme to harness the talent of the young people who study on its courses and go on to establish their own businesses.

Digital City is in three phases:

* Phase one: The proposal to create an £8m institute of digital innovation on or near the campus, where postgraduate students and research staff can work together on projects and where new business ideas can be nurtured before they are launched as independent companies. The institute is also likely to be home to the University's successful Digital City Fellowship scheme, which encourages graduates to develop digital media projects, often ideas first initiated as part of degrees, to see if they are commercially-viable. The university is currently talking to Codeworks, its partner in developing the institute, about locating one of its projects at the new institute

* Phase two: Encouraging digital business clusters linked to other regeneration projects along the banks of the River Tees and in the area's Victorian town centres as part of wider initiatives to regenerate parts of the Tees Valley being revitalised as part of the region's economic strategy.

* Phase three: The possible establishment of a Museum for Digital Media, which could be part of a larger tourist attraction for the area.

Professor Mike Smith, deputy vice-chancellor for research and enterprise at the university, said: "We are taking this very seriously at the university. We take the view that digital technology has a wide application. It is not just computer games or animation films but can be used in everything from planning construction sites to the better understanding of medical problems.

"Our job is to create an environment in which a sense of creativity can flourish. It is not just about ensuring that the talented young people stay on Teesside, but also encouraging innovative people from elsewhere to come here.

"What we have to do is create a hothouse environment in which we encourage innovation. We need to make sure we encourage research and encourage young businesses by acting as a magnet for people running energetic businesses which are hoping to grow."

Prof Smith believes that the Tees Valley is witnessing the development of an exciting new age in its commercial life and that it is important to look to the future rather than harking back to traditional industries in terminal decline. He said: "We are not simply trying to mimic the area's past, with its traditional heavy industries like shipbuilding.

"It is about recognising that things have changed and that the knowledge economy is different. It is about new ways of thinking in order to survive.

"Geography is not as important as it was. Middlesbrough once thrived because it was a port, but with the Internet, geography need not be a factor, particularly with digital technology. We can take advantage of that, and the relatively low cost of living, to help encourage entrepreneurial spirit in the area and keep our talent and attract other talented people.

"It makes sense to create a digital business cluster because these kinds of businesses like to be near each other so they can use each other's complementary skills.

"We hope that developers will see opportunities to provide them with the kind of facilities they need."