Microsoft has withdrawn from a planned UK data centre deal with British AI infrastructure company Nscale, highlighting the power-grid constraints delaying new computing facilities in Britain. The decision affects a single site in Loughton, northeast of London, while both companies say their wider relationship remains intact.
Microsoft confirmed on Monday that it had pulled out of the agreement to lease computing capacity at the planned facility. A company spokesperson said the decision related to “a single site” and added that Microsoft remained “committed to our partnership with Nscale”.
The agreement had been announced last year during a series of multi-billion-dollar investment commitments by US technology companies during United States President Donald Trump’s state visit to the UK. The investments were presented as part of Britain’s effort to become an artificial intelligence superpower.
The Loughton project had also been cited by former British Prime Minister Keir Starmer as the “largest UK sovereign AI data centre”. Its progress has since been affected by the difficulty of securing sufficient electricity for large-scale computing infrastructure.
Nscale said it remained committed to the Loughton project and the UK, while exploring alternative power sources for the site and additional expansion locations in the country. “Our relationship with Microsoft remains strong and long-term,” an Nscale spokesperson said, adding that an “unfortunate London-wide grid issue” had not affected the company’s other contracts.
UK media reports said grid officials had told Nscale that the Loughton site would not have access to power until the 2030s. UK Power Networks, which does not disclose information about individual connections, said many data centres could connect to its distribution network but were waiting for work on the national transmission network, which it does not own.
The problem illustrates the infrastructure gap behind the rapid expansion of artificial intelligence services. Data centres require large and dependable electricity supplies, and meeting that demand can require upgrades to transmission and other grid infrastructure. When those works are delayed, a project may have a site, a technology provider and a customer but still lack an operational power connection.
The development comes as Nscale prepares for an initial public offering on the New York Stock Exchange, reportedly targeting a valuation of up to $35 billion. In its IPO filing, the company said a substantial portion of its committed revenue was driven by a limited number of customers with large contracts, including Microsoft and US AI company Anthropic.
The Loughton agreement represented only a small part of Microsoft’s arrangements with Nscale, according to a person familiar with the matter. Earlier this year, OpenAI also withdrew from a planned partnership with Nscale and Nvidia to establish a UK version of Stargate, a large-scale AI infrastructure initiative. British media reported that high energy costs and regulatory uncertainty contributed to that decision.
Nscale said it was exploring alternative power sources and other UK expansion sites. The companies did not announce a new operational date for the Loughton facility, while UK Power Networks said connection delays were linked in part to works on the national transmission network.
