Microsoft exits UK's flagship AI data center project over power shortage
Microsoft has walked away as anchor customer for Nscale's Essex data center after the local grid operator said it can't supply enough power until the early 2030s.
What happened: Microsoft has pulled out as the anchor customer for Nscale's planned AI data center in Loughton, Essex, a project the UK government had billed as the country's largest 'sovereign' AI facility. Announced in 2025 for a 2027 opening, the site was meant to host a Microsoft-funded supercomputer. Instead, UK Power Networks told Nscale it couldn't guarantee enough electricity to connect the site to the grid until the early-to-mid 2030s. Nscale says it remains committed to Loughton and is hunting for alternative power, but it has now lost its only publicly named customer there.
Why it matters: Keir Starmer's government held up Loughton as proof the UK could host serious AI infrastructure, pairing Nscale with US firm CoreWeave as the two pillars of its domestic compute strategy. Losing Microsoft as anchor tenant, on top of earlier reports that the site was still an active scaffolding yard in March 2026, makes the flagship project look shakier. It also lands as Nscale, backed by Nvidia and prepping a New York IPO at a possible $35bn valuation, faces questions about whether fast-growing 'neocloud' firms are over-leveraged and under-powered.
The power bottleneck, plainly: AI data centers need huge, continuous electricity supplies, often more than a small town, delivered the moment they switch on. Grid operators like UK Power Networks allocate capacity on a queue, and London and the south-east are already stretched. When UKPN told Nscale it had no spare capacity for years, it exposed a pattern now playing out across the industry: chips and funding can arrive faster than the wires and substations needed to run them, forcing developers to consider costly fixes like onsite gas or battery generation.
The rollout: Nscale has cleared the Loughton site and says it's exploring onsite power generation, a faster grid connection, and other UK locations, while insisting its broader relationship with Microsoft, which continues on projects in Norway, Portugal and the US, remains intact. Microsoft has declined to comment. With Nscale's planned NYSE listing still ahead, investors and the UK government alike will be watching whether a replacement anchor customer or a workable power fix emerges before delays start eroding confidence further.