Researchers from the Centre for Ecology and Hydrology developed the method, which allows the oily waste liquid to be treated on site and released into sewers.
Currently, metal-working fluids are sent to a specialist treatment site. The treatment process is energy intensive and some residues have to be sent to landfill.
Researchers have created bioreactors to carry out the process and set up a company, Microbial Solutions, to commercialise them. The company has tested the technology with an unnamed carmaker and has just raised £1.2 million which will allow it to start trials with a "major aerospace manufacturer" soon.
The bacteria digest the metal-working fluid without releasing methane or hydrogen sulphide, says the company.