- Microsoft pulls out of the UK's largest data center project over concerns surrounding power supply
- The site was expected to be hooked up to the grid by 2027, but new estimates suggest it will not be operational until early 2030
- Microsoft was the site's only publicly announced customer
Microsoft has announced it will pull out of a project the UK government had previously dubbed the country’s largest AI data center.
A backlog of power capacity for UK data centers means the site would not be operational until the early 2030s, prompting Microsoft’s withdrawal from the project.
The development, announced in 2025 and headed by British company Nscale, was set to be built at a site in Loughton, Essex - but the project has been mired in controversy after it was revealed in March 2026 that the site was still operating as a scaffolding yard.
Nscale data center in limbo
The data center was originally planned to be hooked up to the grid by 2027, but the UK currently does not have enough energy capacity for the more than 300 data centers still looking to connect to the energy grid. Capacity is stretched so thin that the total electricity demand for data centers is currently 60% greater than current capacity.
Microsoft’s investment was a linchpin for the site with the company planning to fund a supercomputer and act as a key customer once the data center was operational. However, the withdrawal of Nscale’s only publicly announced customer has left the site in limbo.
“We remain committed to both the Loughton project and the UK and we are exploring alternative power sources for the site, in addition to other expansion sites in the UK,” Nscale said in a statement. “Our relationship with Microsoft remains strong and long-term.”
“This unfortunate London-wide grid issue has no impact on our other contracts,” the company added.
Britain’s ‘sovereign’ data center provider
Nscale has positioned itself as Britain’s “sovereign” data center provider and was planning to head to Wall Street with an estimated valuation of $35 billion (£26billion). The company is a neocloud - operating with significant backing from Nvidia - looking to build the underlying infrastructure that will power the AI boom.
But there are concerns that neoclouds and other data center developers could be an instability in the AI ecosystem. Some experts have theorized that AI will need to offer a global revenue of $2.5 trillion annually in order to deliver on the underlying investments made in infrastructure and hardware.
Current estimates suggest the yearly AI revenue sits between just $150 billion and $250 billion.
Developers are taking on increasingly risky debts to lay the foundation for the expected AI boom in the hope that losses can be recovered once productivity gains are fully realized, but as previous revolutionary tech cycles have demonstrated, it is the companies that build upon the underlying infrastructure succeed, but those building it often struggle to recuperate their investments.