- Microsoft has terminated its agreement to use Nscale's planned AI data centre in Loughton, Essex.
- Power supply constraints are expected to delay the facility, which was due to open next year.
- Nscale has lost its only publicly announced customer for the project, putting its UK expansion plans under scrutiny.
Microsoft has abandoned a major UK artificial intelligence (AI) data centre project after concerns over power supply delays, dealing a setback to Britain's ambitions to expand domestic AI infrastructure.
The facility, planned by British company Nscale in Loughton, Essex, was announced in 2025 and promoted by ministers as the country's largest sovereign AI data centre. Microsoft was expected to be its anchor tenant, but has now told Nscale it is terminating its agreement, according to media reports.
The withdrawal follows revelations that power supply constraints could significantly delay the site from becoming operational. The data centre was scheduled to open next year, but according to reports in March that the proposed location was still being used as a scaffolding yard.
With Microsoft leaving, Nscale has lost its only publicly announced customer for the Loughton facility. The company remains involved in a separate Nscale data centre project in Norway, according to AI Weekly.
The reported reason is the delay in securing enough power to bring the Loughton facility online.
AI data centres require substantial electricity to run computing equipment and cooling systems. Power availability has become a major constraint for developers seeking to build new facilities, with delays potentially affecting when customers can begin using the infrastructure.
Microsoft's exit leaves Nscale needing to find another customer for the Essex project or reconsider how it plans to use the site. The company has not publicly announced a replacement tenant in the reports cited.
What does Microsoft's exit mean for Nscale and UK AI plans?
Nscale has positioned itself as a leading provider of sovereign AI infrastructure in Britain, with backing from major technology companies including Nvidia. Losing an anchor tenant could complicate its plans for the Loughton facility, although the company may still seek new customers.
The project was a prominent part of the UK's 2025 AI strategy under former prime minister Keir Starmer. The government has sought to expand domestic computing capacity as demand for AI services grows, with Nscale and US-based CoreWeave among the companies expected to help build infrastructure.
The withdrawal highlights the gap between investment announcements and the practical requirements of building large data centres, particularly access to reliable electricity.
It also comes as investors weigh the risks facing so-called neocloud providers, which build or lease computing infrastructure for AI businesses. While spending on AI infrastructure has supported economic activity, power constraints and operational delays could make it harder for developers to meet their plans.
Nscale was reportedly targeting a Wall Street listing later this year at a valuation of $35bn (£26bn). The Loughton project was one of its prominent UK developments, but the company's valuation target should not be confused with the cost of building the data centre.
