OXFORD'S "proud tradition" of being at the heart of medical breakthroughs is set to continue as the city receives a £126m investment.

More than £12.8m will be awarded to Oxford Health NHS Foundation Trust for a new research centre dedicated to translating innovative research into better treatments for mental health disorders and dementia.

A further £113.7m will be spent in "world leading" medical research in cancer, diabetes, genetics, neurology and surgery at the NIHR Oxford Biomedical Research Centre over the next five years.

The multi-million funding is part of the Department of Health's £816m investment package in NHS research, which was announced today.

The hub of the new mental health centre will be based at Warneford Hospital.

Alastair Buchan, head of medical sciences division at Oxford University, said: "The partnership between Oxford University and the trust is a close and successful relationship that achieves better understanding of psychiatric conditions and creates new treatments that help people cope with – and recover from – mental ill health.

"At the same time, our collaboration is offering new insights into dementia and finding new ways to beat it.

"I am delighted to see the achievements of our dedicated and talented joint team recognised in this funding for an NIHR biomedical research centre dedicated to mental health and dementia in Oxford."

The funds set aside to be spent on research at the NIHR Oxford BRC have been described as a "vote of confidence" by the centre's director, Professor Keith Channon.

He said: "This is fantastic and I think this recognises the importance of scientific and clinical research for the benefit of our NHS patients."

The last round of funding in 2011 allowed Oxford University researchers to develop a simple MRI technique that detected people with early-stage Parkinson's disease.

Professor Channon, who is also a consultant cardiologist at the hospital, said: "We are extremely fortunate to have this unique partnership.

"We can bring researchers and clinicians to work together in a way they would not normally do, creating a live laboratory where research is translated into patient care.

"For the BRC one of the areas we are looking into is to try and identify how we can better diagnose and manage the complexities of what we call long term conditions."

Previous NIHR Oxford BRC-supported research include a project to replace bedside paper charts with "early warning" tablet computers, support for research that developed an Ebola vaccine and the development of a smartphone app for pregnant women with gestational diabetes to monitor blood glucose levels.

Nicola Blackwood, Oxford West and Abingdon MP, said: "This city has exported breakthroughs to the world – from gene therapy to restore sight, to a new test for tuberculosis and leading the way the NHS treats those with eating disorders.

"The last round of funding led to medical breakthroughs – like genetically engineering patients' own cells to attack cancer and the world's first ever use of gene-edited immune cells to fight leukaemia that had previously been thought untreatable.

"Oxford has a proud tradition of being at the heart of the endeavour to push the boundaries of modern medicine."