Britain's plan to become an AI superpower has run into a very old-fashioned problem: getting enough electricity to the right place. Microsoft has pulled out of a deal to be the anchor customer at Nscale's planned AI data centre in Loughton, Essex, after the local grid operator said it could not supply the power the site needs until the 2030s.
The news first broke in the Telegraph over the weekend, and Microsoft confirmed it on Monday. "This decision relates to a single site," a spokesperson said, stressing that the company remains committed to its wider partnership with Nscale.
What was supposed to happen
Loughton was meant to be a showpiece. The project was among the wave of technology deals unveiled during Donald Trump's state visit to the UK in September 2025, and the government had already singled it out in its AI plan that January as the country's largest "sovereign" AI data centre, meaning computing power built and run on British soil.
The plan was for Microsoft to lease the whole site: around 50 megawatts of capacity, packed with 23,040 of Nvidia's top-end GB300 chips, feeding Microsoft's Azure cloud services in Britain. It was due to start running early next year.
Instead, UK Power Networks, which runs the electricity network across London and the south-east, reportedly told Nscale last month that it would not be able to provide enough power until the early to mid-2030s. A data centre with no electricity is just an expensive shed, so Microsoft has walked.
Bad timing for Nscale
Nscale, a London-based company backed by Nvidia, has grown at remarkable speed. It says its contracted business has risen from around $100 million to more than $103 billion in two and a half years, and it filed last month to list its shares in New York, with reports suggesting it could raise up to $3 billion at a valuation of as much as $35 billion. Losing the only publicly named customer for its flagship British site, just weeks before that listing, is not the headline any company wants.
Nscale insists the damage is contained. A spokesperson called it "an unfortunate London-wide grid issue" that has "no impact on our other contracts", and said the company is still committed to Loughton and is looking at generating power on site, as well as other UK locations. Microsoft is understood to remain involved in a separate Nscale project in Norway.
It is also not the first wobble for Loughton. In March, the Guardian reported that the land earmarked for the data centre was still a working scaffolding yard. Nscale has since cleared the site.
The bigger problem: power, not demand
Nothing here suggests Microsoft has lost its appetite for AI computing. The issue is the plug in the wall. Across Britain, data centre projects are stuck in long queues to connect to the grid, with some facing waits of more than a decade. The energy regulator Ofgem has been trying to clear the backlog, including proposals to charge projects fees for their place in the queue, and in Scotland new data centre planning approvals have been paused.
That matters because AI runs on electricity. Training and running large models takes enormous amounts of power, and the companies building them will put their data centres wherever they can get it fastest. If the UK cannot connect sites in years rather than decades, that investment will simply go elsewhere, whether to Norway, the US or the Middle East.
Our take
This is one of the most important AI stories in Britain this year, even though no new technology was involved. The government has bet heavily on data centres as a pillar of growth, and Loughton was the poster child. Its setback shows that the real race in AI is not only about clever chips and models, but about power stations, cables and substations. Expect grid connections to become one of the biggest political arguments about AI in the UK over the next year. Whether Nscale's listing goes ahead on schedule will be the next thing to watch.