Microsoft has pulled out of Nscale's planned AI datacentre at Loughton in Essex over power supply concerns, a fresh setback for a project the UK government hailed as the country's largest AI datacentre and a blow to the British company's ambition to float on Wall Street this year.
Microsoft informed Nscale, the British developer behind the project, that it was ending its agreement to be the anchor tenant, in a decision first reported in the Telegraph. The scheme, announced in 2025 and planned to open next year, was highlighted by Keir Starmer's government when it set out the UK's AI strategy, with ministers describing it as the "largest UK sovereign AI datacentre".
Doubts about the project had already emerged. In March, the Guardian reported that the Loughton location was still an operational scaffolding yard, and a month before Microsoft's decision it emerged that power supply problems meant the project would face a lengthy wait before coming online.
The end of the Microsoft deal means Nscale has lost its only publicly announced customer for the Essex datacentre. The company, backed by tech companies including Nvidia, has positioned itself as Britain's "sovereign" datacentre provider, and the loss could undermine its ambition to float on Wall Street this year with a potential valuation of $35bn (£26bn). Microsoft remains on board for another Nscale project in Norway.
An Nscale spokesperson said: "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. Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts."
Analysis
Why This Matters
- The Loughton project was a flagship of the UK government's AI strategy, so losing its anchor tenant undercuts one of the scheme's central promised deliverables.
- Power supply is becoming a defining constraint on AI infrastructure globally; this case shows how grid limits can unravel an announced project.
- Nscale's planned Wall Street float, and its positioning as a "sovereign" datacentre provider, now depends on securing a replacement customer.
Background
AI datacentres house the computing infrastructure behind systems such as chatbots, and governments have been competing to attract them as part of wider efforts to lead in artificial intelligence. The facilities are highly power-intensive, and grid capacity has become a recurring bottleneck for new projects. The Loughton scheme was announced in 2025 and promoted by ministers as the "largest UK sovereign AI datacentre", part of a push to build domestic computing capacity.
Key Perspectives
Nscale: The company says it remains committed to the Loughton project and to the UK, is exploring alternative power sources and other expansion sites, and maintains that its relationship with Microsoft is strong and long-term.
Microsoft: The company has ended its agreement over concerns about the London-wide grid's power supply, but it is continuing its involvement in Nscale's separate project in Norway.
Critics and sceptics: Doubts were already mounting before this decision. The site was still an operational scaffolding yard in March, and power supply problems had emerged in the weeks before Microsoft pulled out. With its anchor tenant gone, Nscale has no publicly announced customer for Loughton, and related Guardian reporting has questioned whether the UK's multibillion-pound AI drive rests on announced projects rather than delivered ones.
What to Watch
- Whether Nscale finds alternative power sources or a replacement anchor tenant for Loughton, and whether construction eventually begins.
- The fate of Nscale's planned Wall Street float this year and its $35bn valuation ambition.
- Microsoft's continued role in the Norway project, as a signal of where it plans to concentrate its datacentre partnerships.