OXFORD University is to defy the crisis gripping higher education with a £1bn scheme to transform the university science area, delivering a boost to the local economy.

The economic downturn and prospect of big reductions in central government funding will not deter the university from ploughing ahead with the biggest building programme in its 800-year history.

The investment will ultimately see many of the buildings in the science precinct in South Parks Road replaced in a programme stretching over two decades. It will coincide with the university’s £600m plans to build a new quarter on the site of the Radcliffe Infirmary.

With the local construction industry under pressure and councils and schools forced to abandon capital projects, the university’s ongoing building will provide a major boost for local businesses and workers.

Proposals to build a new chemistry department in South Parks Road will alone cost £165m, with at least 600 workers involved in its construction. Next year, the university is also hoping to see work begin on a new physics department on Parks Road, opposite Keble College, at a cost of £34m.

Thousands of jobs in Oxfordshire are expected to be threatened by next week’s Government spending review.

Almost 50,000 people in Oxford work in the public sector, representing almost half of the total workforce, the highest proportion in the UK.

The education sector in the city is particularly important, accounting for almost 20 per cent of jobs in the city.

But it appears that Oxford University will buck the trend of cutting back on investment in the public sector by setting out its masterplan to redevelop what is termed the South Parks-Keble Science Triangle, near the University Parks.

The landmark chemistry building, housing what will be the largest chemistry department in the western world in both teaching and research, will contain 46 laboratories.

A planning application will be submitted next month. Plans for the chemistry department and physics building will be shown in the Town Hall on November 1, with a masterplan for the science precinct.

University spokesman Matt Pickles said: “This will all provide a major boost to the local economy, not least because there are due to be 600 people working on the chemistry site alone. So it is going to create jobs.

“In addition, inside the new building support staff may be recruited from the local jobs market, as well as staff responsible for its daily running.

“The local economy, too, will benefit from the enhancement of Oxford’s reputation as a world-leading university and all that goes with that in attracting students and tourists.”

At a time when uncertainty over higher education funding is leading universities to rethink their business models, Oxford is preparing to announce that the university’s Oxford Thinking fundraising campaign has hit the £1bn mark.

Mike Wigg, university acting head of estates, said the redevelopment would create a spine through the science precinct, with a pedestrian route linking the Natural History Museum to the Parks.

Efforts would also be made to “resolve the conflict” between pedestrians, cyclists and motorists, in an area that has seen serious accidents.

Mr Wigg added: “Oxford is fortunate to benefit from major benefactors who want to put money into buildings.”

He said national contractors would be encouraged to use local businesses wherever possible.

The university has already made a start on upgrading its science sites. This week it unveiled its new £28m Earth Sciences Building, in South Parks Road, to house 300 scientists.