AN £11m project aims to make the Tees Valley a world leader in digital technology and computer animation.

The Institute of Digital Innovation, to be built by the Teesside University and One NorthEast, is expected to create almost 300 jobs and 130 new companies by 2010.

The ambitious plan will create DigitalCity, a super-cluster of digital technology and digital media enterprises, and should also benefit existing digital businesses in the Tees Valley and the North-East in general.

One NorthEast, the regional development agency, is contributing up to £6m of the cost, with the rest coming from the university.

The institute will be based on the university's Middlesbrough campus and managed by its DigitalCity office. It will collaborate with other science and technology centres in the region, including the Science City in Newcastle; NaREC in Blyth; Netpark in Sedgefield; and the Wilton Centre in Redcar and Cleveland.

Alan Clarke, One NorthEast chief executive, said the university had a growing reputation in the digital media and technology sector.

"This exciting programme will ensure that this academic excellence is converted into business creation and growth, putting the Tees Valley at the forefront of digital technologies," he said.

"Jobs in digital technology are already replacing jobs lost in more traditional industries and are widely recognised as being a strong part of the future economy of the Tees Valley.

"DigitalCity will attract and retain the major talent in the region that is crucial for the economic growth of the North-East."

The four-storey institute will stand next to the university's innovation and virtual reality centre. Building will start early next year, with an expected completion date of summer 2007.

Prof Graham Henderson, university vice-chancellor, said it was the first phase of the university's plans to build on its pre-eminence in the area of digital media and digital technology.

"This is going to be a very important part of the future of the University of Teesside," he said.

"It is an area of great strength for us and we look forward to using our expertise to help the regeneration of the Tees Valley by encouraging new businesses and so contributing to economic growth in this region."

Initial funding provided by One NorthEast has seen the appointment of a DigitalCity Development Team and the launch of smaller initiatives, including the DigitalCity Fellowships scheme, which provides financial support and expertise to graduates, alumni, junior staff, regional artists and creative producers to develop their business ideas.

Among the graduates to form their own digital media companies, thanks to the scheme, are Onisoft, Seed Animation, Fake Believe and MoShine, a new graduate company which won the best new company title at the DigitalCity Fellowships 2005 exhibition and has been commissioned to do the graphics for the DigitalCity DVD.

Janice Webster, DigitalCity project director, explained: "By 2010 our goal is to create a self-sustaining project boasting world-class people and projects with a brand that is a byword for innovation, daring and excellence."