Microsoft has pulled out of Nscale’s planned £2bn artificial intelligence data centre in Loughton, Essex, the BBC has reported, although the British company says it still intends to build what would be the UK’s largest AI data centre on the site.
The BBC understands that Microsoft, which had said it would fund a supercomputer at the Loughton site, has terminated its involvement. Microsoft declined to comment.
The data centre was due to receive its electricity supply by the end of this year. However, as first reported by the Telegraph yesterday, Nscale has been told the connection will not happen until the 2030s.
A spokesperson for Nscale said the company was exploring alternative power sources for the site and that its relationship with Microsoft remained strong for the projects the two companies are pursuing overseas.
“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,” Nscale said. “Our relationship with Microsoft remains strong and long-term.”
“This unfortunate London-wide grid issue has no impact on our other contracts,” the company told the BBC.
Microsoft’s UK pledge
Nscale announced last year that it had pledged £2bn to build and open the Loughton facility. The site is expected to create 250 permanent jobs when it eventually opens.
Microsoft had earmarked part of the $30bn (£22bn) it is investing in the UK to fund the Loughton supercomputer, the BBC reported. When it announced that investment in September 2025, Microsoft said the money would be spent between 2025 and 2028 and included $15bn of capital expenditure, which would enable it to build the country’s largest supercomputer, with more than 23,000 Nvidia GPUs, in partnership with Nscale.
Nscale and Microsoft are still working together on projects in Norway, Portugal and the United States. In the prospectus for its planned New York listing, filed last month, Nscale disclosed agreements with Microsoft worth $44bn running until 2033, Business Matters reported. The same filing showed the company lost $1bn in the first six months of this year on revenues of $140.6m.
When Nscale appointed Sir Nick Clegg and Sheryl Sandberg to its board in March, the Loughton facility was expected to be operational by 2026.
Grid connection queue
The delay at Loughton comes as the energy regulator tackles a backlog of requests to connect to the electricity network. On 29 July, Ofgem launched a consultation on plans to deter speculative data centre projects from holding places in the queue, after contracted demand offers rose from 41GW to 125GW between November 2024 and June 2025. Ofgem said data centre projects accounted for at least 80GW.
Under the proposals, large data centre developments would pay a commitment fee of between £237,500 and £712,500 per megawatt when accepting a connection offer, equivalent to about 2.5 to 7.5 per cent of average project costs, according to the regulator. The fee would be refunded when a project is energised and forfeited if it leaves the queue early. The consultation closed on 16 September.
Eleanor Warburton, Ofgem’s director for energy system design and development, said at the launch: “Where speculative projects take up space in the queue, they can delay other schemes and create uncertainty about future network needs.”
Ofgem said that since wider connections reforms were introduced, around 7.8GW of projects had been brought forward by an average of six years.
Other large AI infrastructure projects in the UK have also missed their original timetables. In April, Business Matters reported that OpenAI’s planned Stargate data centre on Tyneside, developed in partnership with Nscale, had passed its first quarter 2026 target with no revised timetable. Research by Sightline Climate cited in that report found that up to half of large-scale data centre projects were running behind schedule because of planning difficulties and constraints on energy supply.
