A £1.5M project to spearhead a research centre’s growth could help pump £170m into the North-East economy, it has been claimed.

Redevelopment work has started at The Materials Processing Institute, as bosses push to make the North-East an industrial innovation hub.

The renovation, helped by £3m Local Growth Fund grant from regeneration body Tees Valley Unlimited, will see a section of the building, originally erected in 1976, revamped into a two-floor unit.

The Institute, based near Middlesbrough, works with companies to support their growth, and says the changes will deliver space for up to 15 small and medium-sized firms, as well as business services and commercial departments.

Chris McDonald, chief executive, said the expansion, due to be finished in November, will bring a raft of benefits, most notably a significant financial boost.

He said: “We have a lot of plans in place – this building work is one - which could generate up to £170m over the next 20 years into the local economy, based on firms coming through the campus, growing, and then moving on, so it is something we are very excited about.

“We have got a long track record of being at the forefront of technological development, and this work enables us to provide world-leading facilities to match that.

“We expect the majority of the new tenants will be technology-based, and ones which can get the benefits of what we do as an organisation.”

The Institute, founded almost 70 years ago, evolved to become the research and development arm, firstly of British Steel and then Tata Steel, before returning to independent status last year.

The UK’s longest-established centre for industrial materials research, it has opened its doors to companies outside of the steel sector, to make use of its research and development services.

Dr Gerard Stephens, the Institute’s director of SME technology, added: “We are delighted this work has started.

“When it is completed, the infrastructure will be in place for us to be an open access innovative centre for materials processing.”

The work is being led by Tyneside-based Meldrum Construction.

Earlier this year, the Institute played host to a team of scientists involved in a mission to Mars.

Researchers from Innovative Small Instruments (ISI) came to the region to use the centre’s equipment to test out a probe, which could save the steel industry time and money.

The ISI specialises in systems for space-borne applications and previous projects include a piece of imaging equipment used on the Mars Rover.