Microsoft has withdrawn from a major artificial intelligence (AI) data centre project in the UK over concerns about the power supply, delivering a significant setback to the government’s technological ambitions, The Guardian reported.
The facility, being developed by the British firm Nscale, was announced in 2025 and championed by ministers as the country’s largest sovereign AI data centre.
Power supply issues and site delays
Located in Loughton, Essex, the data centre was scheduled to open next year. However, the project has faced mounting scrutiny. In March, The Guardian revealed that the proposed location was still operating as a scaffolding yard.
Now, Microsoft—which was expected to be the anchor tenant for the facility—has informed Nscale that it is terminating its agreement. The withdrawal, which was first reported by The Telegraph, follows recent revelations that power supply constraints would cause a lengthy delay before the data centre could come online.
Impact on Nscale’s $35-billion IPO
With Microsoft’s exit, Nscale has lost its only publicly announced customer for the Loughton project. However, according to AI Weekly, Microsoft remains involved in another Nscale data centre project in Norway.
Nscale, which is backed by tech heavyweights including Nvidia, has positioned itself as Britain’s primary “sovereign” data centre provider. The loss of a key anchor tenant could potentially undermine the company’s ambitions to float on Wall Street later this year, where it was targeting a valuation of $35 billion (£26 billion).
UK’s AI strategy and ‘neocloud’ vulnerabilities
The Loughton facility was a key highlight of former UK Prime Minister Keir Starmer’s 2025 UK AI strategy. To capture the rapid growth of the AI sector, the UK government’s proposals have heavily focused on two Nvidia-backed “neocloud” companies: London-based Nscale and US-based CoreWeave.
Investments in AI infrastructure have recently helped the British economy exceed growth expectations, even as global business activity faces headwinds from the conflict in the Middle East.
Despite this economic boost, there is a growing chorus of industry voices warning that neocloud providers may represent a vulnerability within the broader AI economy, particularly as infrastructure partners continue to face operational and power-related delays.
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