They doubted the capacity of public bodies to create high-technology business clusters in places where the science base might be too weak.

The rabbit warren of labs and offices south-east of Nottingham city centre has proved detractors wrong on several counts.

BioCity’s first three buildings are fully occupied, mostly with biomedical businesses. Only a smattering of tenants that are not technology start-ups – accountants, for example – have been admitted on the basis that they provide support services.

A fourth building will open this year, providing growing-on space for established BioCity companies.

About 40 per cent of the ventures, which employ 450 people between them, make a profit – an unusually high proportion for a facility of this kind. Moreover, BioCity banks enough rent cheques to keep going without public subvention of its running costs.

Mike Carr of the East Midlands Development Agency, a partner in the incubator, says: “It is a very unusual incubator in that it washes its face and pays something back to the taxpayer.”

However, BioCity Nottingham has had substantial support in acquiring and creating capital assets. It owes its existence to a remarkable piece of corporate philanthropy by BASF.

When the German chemicals business pulled out of pharmaceuticals research in Nottingham in 2001, executives could not bear to sell its 100,000 square foot R&D complex in the city.

A purchaser would likely have brought in demolition machines and levelled the buildings ahead of residential or retail redevelopment.

The land value was £4m. The cost of building and equipping an equivalent laboratory was estimated at £25m. So BASF gave the laboratories to Nottingham Trent University, which set up a partnership with Emda and Nottingham University to refurbish them as a biomedical incubator, at a cost in public funds of about £11m.

“It was a very brave thing for BASF to do in donating the site,” says Glen Crocker, chief executive of BioCity. “And it was brave of [the universities and Emda] to take it on, because that involved a leap of faith.”

The relative success of BioCity suggests the East Midlands has a stronger biomedical science base than outsiders credited it with.

Boots founder Jesse Boot, benefactor of Nottingham University, ensured the institution had a strong specialisation in pharmacy. His company also pursued research in this field for many years. Boots was the original owner of the BioCity site, where the use of Ibuprofen as a pain killer was pioneered. Meanwhile, AstraZeneca maintains a large R&D centre at Loughborough.

BioCity companies have a bias towards commercialisation as a medium-term goal. In other words, businesses seeking new cures for cancer over a 20-year time span are thin on the ground. That makes tenants more durable financially.

For example, Critical Pharmaceuticals, run by local entrepreneur Lisbeth Illum, specialises in finding better ways to deliver tried and tested compounds.

Biocontrol, the brainchild of David Harper, has meanwhile acquired early-stage technology for combating bacterial infections using “friendly” viruses and taken it through Phase II efficacy trials. Another business, Allmi-Care, set up by former Boots executive Alan Marsh, imports Japanese cooling pads used for easing aches and pains.

A series of start-up entrepreneurs interviewed at BioCity last week praised the benefits of clustering for improving knowledge transfer and in sharing facilities. For example, they now have shared access to a £250,000 nuclear magnetic resonance machine, which organic chemists use to analyse the structure of compounds.

Their main gripe was a lack of equity finance. Poor returns mean venture capital is a niche part of institutional investment. And biotech is probably the least popular destination for these limited resources, reflecting the poor historic performance of many British biotech businesses.

It appears that “public equity” funds – investment vehicles supported with taxpayers’ money for partly political reasons – have been the most reliable providers of equity capital to companies in BioCity.

The credibility of BioCity would be bolstered if it attracted more investment from bigger bioscience companies.

BioCity tenant Kevin Slater reportedly realised several millions by selling Lumitec, a drug delivery company, to US rival Cambrex a few years ago. Dr Harper, meanwhile, hopes to float Biocontrol at a valuation of about £30m.

Oxford can boast it fostered companies such as Powderject, the drug delivery specialist, while Cambridge can crow that its success stories include drug developer Cambridge Antibody Technology.

Nottingham will not enjoy the same bragging rights until it has incubated some big, valuable companies of its own.

But thanks to BioCity, its status as a centre for biomedical start-ups is a lot less questionable than it was five years ago.