The project, known as the STEAMHouse, aims to create up to 10,000 jobs and regenerate Birmingham’s long-neglected Digbeth area.
The government support comes just a month after the Arts Council injected £500,000 into the STEAMHouse initiative through its Creative Local Growth Fund.
Business secretary Sajid Javid said: “It's a project between universities, the creative industries, which the Midlands is very well known for, and also businesses – all working together to create a new innovation centre, which will then lead to new discoveries, new work and new jobs.”
The first phase of the scheme will be delivered in partnership with Eastside Projects and see the creation of a new production space and workshop for artists.
The University have teamed up with estate agency Good Estates to deliver the redevelopment of the currently derelict tea factory, which will create a space for STEAMHouse and a range of co-working artist production, incubation and networking facilities.
The University hope that by linking academic research and Digbeth’s creative arts scene, a new supply chain will be developed across the region.
Birmingham City University Pro-Vice-Chancellor, Professor Julian Beer, said the investment would have a huge impact on the city: “STEAMHouse aims to promote growth and job creation by forming clusters of businesses, academics, artists and local communities, similar to that seen in London’s Shoreditch and Kings Cross.
“STEAMHouse will focus on how the creative arts – rather than science and technology alone – can lead the way in solving the problems facing small businesses.”