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Microsoft pulls out of AI datacentre project in Essex over power supply concerns

The development of a huge AI datacentre hailed by the UK government has received a fresh setback after Microsoft pulled out of the project over concerns about power supplies. The development by the British company Nscale, heralded by ministers as the country’s largest AI datacentre when it was announced in 2025, was planned to open at Loughton in Essex next year. Doubts had already emerged about the scheme after the Guardian revealed in March that the location was still an operational scaffolding yard. Now there…

By the Truvace desk2 min read1 sourceJournalismTRV-2026-1826· cite & verify
Microsoft pulls out of AI datacentre project in Essex over power supply concerns

In brief

Microsoft has ended its agreement to anchor Nscale's Loughton datacentre in Essex, a site the UK government promoted in 2025 as its largest sovereign AI datacentre. The decision followed news that UK Power Networks could not supply enough electricity to the site until the early to mid-2030s.

The episode shows how energy supply can limit AI infrastructure plans that governments and investors treat as engines of growth. It is still unclear whether Nscale can find onsite generation or a faster grid connection, and whether the setback will affect its planned New York listing.

Main points

  1. Microsoft, expected to be the anchor tenant, told Nscale it was pulling out of its Loughton agreement.
  2. UK Power Networks said it could not supply enough power to the site until the early to mid-2030s.
  3. Nscale lost its only publicly announced customer for the Essex site but keeps Microsoft as a customer for a project in Norway.
  4. Nscale says it is exploring onsite power generation and ways to speed up the grid connection.

The problem

Electricity grid limits left Nscale's planned Loughton AI datacentre unable to get enough power until the early to mid-2030s, and Microsoft, its only publicly announced customer, withdrew.

The rundown

The Loughton project was announced by Nscale in 2025 and planned to open next year. It was highlighted in the government's AI strategy. The Guardian reported in March that the site was still an operational scaffolding yard, which had already raised doubts about the scheme.

Nscale, backed by Nvidia, is described as a neocloud. The article says a growing number of voices see neoclouds as a vulnerability in the wider AI economy, as delays pile up and some companies take on risky debt. A delayed New York flotation could make these concerns more visible.

Nscale says it remains committed to Loughton and the UK, is exploring alternative power sources and other UK sites, and describes its Microsoft relationship as strong. It attributes the problem to a London-wide grid issue that does not affect its other contracts.

Sources

  1. JournalismThe Guardian2026-10-18

The debate