Microsoft has walked away from what the UK government once billed as the country’s largest AI datacentre. The American tech giant has terminated its agreement with the British company Nscale to be the anchor customer at a planned £2bn facility in Loughton, Essex, after being told the site would not receive enough grid power until the early to mid-2030s.
The withdrawal, first reported by the Telegraph on Sunday and confirmed by the Guardian and the BBC, removes the only publicly announced customer from a project that ministers had held up as a centrepiece of the UK’s AI strategy. Nscale says it remains committed to the site and is exploring alternative power sources, but the loss of its anchor tenant is a serious blow to a scheme that was supposed to open next year.
What Microsoft had promised the Essex site
The Loughton project was announced in 2025, when Nscale pledged £2bn to build and open what it described as a pioneering facility. The government described it at the time as the “largest UK sovereign AI datacentre”, and it was expected to create 250 permanent jobs once operational.
Microsoft’s role was central. Only last month, the company announced that part of the $30bn (£22bn) it is investing in the UK would fund a supercomputer at the Loughton site. As one of the largest planned customers, Microsoft was expected to be the anchor tenant — the commitment that would have made the economics of the rest of the facility work.
That commitment is now gone. Microsoft has declined to comment on its withdrawal. Nscale, for its part, has been careful to frame the split as narrow rather than a broader rupture.
“Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts,” an Nscale spokesperson said.
The two companies are still working together on projects in Norway, Portugal and the United States, according to the BBC.
The power problem that sank the deal
The immediate cause is electricity — or the lack of it. The Loughton datacentre had been due to receive its power supply at the end of this year. But earlier this month it emerged that UK Power Networks, which owns and maintains the electricity grid across London and the south-east of England, had told Nscale it could not supply enough power to the site until the early to mid-2030s.
For a company trying to open a flagship AI facility next year, that gap is not a delay. It is a different decade.
Nscale has not given up on the site. It has cleared the land — which, as the Guardian revealed in March, was still an operational scaffolding yard well after the project was announced — and is now investigating whether it can generate power onsite and whether the grid connection process can be sped up.
“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,” the company’s spokesperson said.
But the episode underlines how energy supply has become a hindrance to datacentre development more broadly. AI facilities are enormously power-hungry, and the grid in and around London is already heavily constrained. A project that cannot secure electricity on a competitive timetable cannot secure customers either — which is precisely the calculation Microsoft appears to have made.
A setback for the UK’s sovereign AI push
The Loughton project was not just any datacentre. It was one of two flagship schemes — alongside facilities from the US company CoreWeave — that the government highlighted when setting out its AI strategy in 2025 under Sir Keir Starmer. Both Nscale and CoreWeave are closely tied to Nvidia, the chipmaker whose hardware underpins the AI boom, and that relationship is what earned them their roles in Britain’s sovereign AI push.
Nscale positions itself as Britain’s “sovereign” datacentre provider — a homegrown alternative for the computing power that AI products such as chatbots depend on. Losing Microsoft, its only publicly announced customer for the Essex site, undermines that pitch at exactly the moment the company needed momentum.
The government has leaned on AI investment as a driver of economic growth, and official figures show investment in the technology is among the factors helping Britain beat expectations of weaker growth this year. But the Loughton withdrawal is an awkward reminder that headline announcements and delivered infrastructure are not the same thing.
The stakes for Nscale’s Wall Street float
The timing compounds the damage. Nscale has been aiming to float on Wall Street this year with a potential valuation of $35bn (£26bn). Losing the anchor tenant at its flagship UK project could complicate that ambition — and the Guardian notes that if the IPO is pushed back, vulnerabilities in the broader AI economy may come into sharper focus.
Nscale is what the industry calls a “neocloud”: one of a number of companies with deep ties to Nvidia building the infrastructure for AI. A growing chorus of voices argues these neoclouds may be a weak point in the wider AI economy, particularly as delays pile up across partners and companies take on increasingly risky debt to fund rapid growth.
The company’s backers include high-profile names. The former UK deputy prime minister Nick Clegg and the former Meta chief operating officer Sheryl Sandberg sit on its board. Clegg holds a 0.25% stake that would be worth $88m if the company floats at a $35bn valuation — a figure that shows just how much is riding on the Loughton story resolving well.
What happens to the Loughton site now
Nscale insists the project is not dead. The company says it is committed to Loughton and to the UK, is looking at onsite power generation, and is weighing other expansion sites in the country. Whether a replacement anchor tenant can be found — and whether the grid connection can realistically be accelerated — will decide if the UK’s largest announced AI datacentre ever actually gets built.
For now, the facts are stark. The site was announced in 2025 with a £2bn pledge and government fanfare. The land was still a scaffolding yard months later. The power was due at the end of this year; the grid operator says it cannot deliver until the 2030s. And the customer who was meant to fund the supercomputer has gone.
Microsoft, meanwhile, is still spending heavily in Britain — the $30bn UK investment commitment stands — but it will not be doing so in Loughton. The question ministers now face is a simple one: if the UK’s flagship sovereign AI datacentre cannot get electricity this decade, what does that say about the country’s readiness for the AI era?
FAQ
Why did Microsoft pull out of the Essex datacentre?
Microsoft terminated its agreement with Nscale after UK Power Networks said it could not supply enough power to the Loughton site until the early to mid-2030s, far beyond the end-of-year connection the project had been counting on. Microsoft has declined to comment.
Is the Loughton datacentre cancelled?
Nscale says it remains committed to the project and is exploring alternative power sources, including onsite generation, as well as other UK expansion sites. However, Microsoft was its only publicly announced customer for the Essex site.
Are Microsoft and Nscale still working together?
Yes. Nscale says its relationship with Microsoft remains strong and long-term, and the two companies are still collaborating on projects in Norway, Portugal and the United States.
How much was Microsoft investing in the UK?
Microsoft announced last month that part of the $30bn (£22bn) it is investing in the UK would have funded a supercomputer at the Loughton site.