The UK datacentre market is facing significant unpredictability, with multiple factors—ranging from power supply and cooling to government policies and connectivity—shaping where and how new facilities can be built. According to Andrew Jay from CBRE, forecasting datacentre development locations has become more challenging than ever due to technological evolution, geographical constraints, and infrastructure limitations.
A major bottleneck for datacentre expansion lies in power availability, especially in high-demand locations. Grid enhancements and the adoption of micro-grids are among potential solutions, but these require long-term investment and policy changes. Jay stresses that aligning datacentre build timelines with the slower pace of power infrastructure upgrades is proving difficult, calling for increased government collaboration.
The UK’s electricity demand is projected to more than double by mid-century, driven by ambitions to meet net-zero targets and the explosive growth of AI workloads. The AI sector, particularly in training large language models, requires significantly more power than traditional enterprise IT. As a result, there is a global race to expand datacentre capacity rapidly, with CBRE projecting substantial new supply in both primary and secondary European markets.
Power Complexity, Efficiency Measures, and Balanced Demand Driving Strategic Datacentre Location Decisions
Unlike the past, when power planning was straightforward, today’s mix of renewables, micro-grids, and uncertain regulatory support for technologies like small modular reactors adds complexity. Jay highlights that planning must now include power timelines, evolving energy sources, and coordinated efforts to avoid misaligned infrastructure development.
Power Pressures and Policy Gaps Disrupt UK Datacentre Expansion Amid Soaring AI DemandIn this unpredictable climate, datacentre operators are increasingly trying to mitigate risk by improving energy efficiency. Strategies include using better cooling technologies, minimizing equipment loads, and prioritizing flexible, scalable designs. AI and hyperscale cloud providers are the biggest drivers of new builds, often requiring mega-facilities in proximity to other availability zones, such as those clustered in West London.
While AI garners significant attention, the majority of datacentre demand still comes from traditional enterprise sectors like banking, pharmaceuticals, and retail. Digital Realty’s Séamus Dunne warns that focusing exclusively on AI infrastructure may overlook broader industry needs. He advocates for strategic planning in key regions like the London-Oxford-Cambridge triangle to support innovation and long-term growth.
Strategic Clarity, Risk Planning, and Policy Alignment Essential for Future Datacentre Development Success
Financial hurdles and risk aversion remain high in the sector. Investor David Bloom points out that the industry faces high barriers to entry, requiring strategic clarity and alignment between stakeholders. He cautions against chasing AI hype without strong use cases, urging datacentre planning to begin with realistic goals and measurable outcomes to avoid misinvestment or oversupply.
With the UK government officially designating datacentres as Critical National Infrastructure (CNI), a new level of scrutiny and responsibility is emerging. While this status brings security benefits and faster emergency response access, it also requires transparency, alignment with national policies, and consideration of the broader public interest, potentially complicating private-sector operations.
The path forward involves deeper collaboration across industry and government. While bodies like NESO work to address systemic challenges, datacentre operators must proactively manage risk by planning around uncertainty. Clear policy guidelines, stakeholder education, and coordinated infrastructure development are key to unlocking the next phase of the UK’s digital infrastructure growth.
