Microsoft has withdrawn from its agreement with Nscale to develop the UK’s largest AI data centre in Loughton, Essex, leaving the British infrastructure business searching for alternative power sources and partners for the £2bn project.
The plans were announced in 2025, with Nscale committing to build and operate a major AI supercomputer facility designed to support Microsoft’s Azure services across the UK. The government welcomed the agreement as part of its wider AI strategy, with former Prime Minister Sir Keir Starmer highlighting the project as a significant step in developing the country’s AI infrastructure.
The facility was expected to deliver 50MW of AI computing capacity, with the potential to scale to 90MW, and house more than 23,000 Nvidia graphics processing units. Microsoft had been expected to act as the centre’s anchor tenant, providing a major source of demand for the planned infrastructure.
However, as Talking Business reported in September, concerns surrounding electricity supplies have delayed the project, with some sources suggesting the site may not receive a connection to the national grid until the 2030s. The development had originally been expected to receive power in time to begin operations much sooner, creating uncertainty around its delivery timetable.
Nscale said its relationship with Microsoft remained strong despite the withdrawal, with the two businesses continuing to work together across Europe and the United States. The company added that it remained committed to the Loughton project and was exploring alternative power sources alongside other potential expansion sites in the UK.
The setback comes as Nscale prepares for a potential listing on the New York Stock Exchange, with reports suggesting the business is targeting a valuation of up to $35bn. Founded in London, the company has attracted backing from major technology businesses including Nvidia and has positioned itself as a British provider of sovereign AI infrastructure.
The company’s board includes former deputy prime minister Nick Clegg and former Meta executive Sheryl Sandberg. In March, Nscale was valued at approximately $14.6bn in a funding round led by Norwegian energy group Aker and investment firm 8090 Industries, with Nvidia, Dell and Nokia also participating.
Nscale reported a net loss of $1bn against revenues of $141m in the first half of the year, with the bulk of the loss attributed to non-cash charges. The loss of Microsoft from the Loughton project adds further pressure as the business seeks to deliver its planned data centre developments and prepare for its public market debut.
The challenges also highlight the infrastructure constraints facing the UK’s ambitions to expand its AI capabilities. Data centres require substantial and reliable electricity supplies, with delays to grid connections threatening the delivery schedules of projects designed to meet growing demand for computing capacity.
Microsoft has been contacted for comment. Nscale said: “Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts.”
The company said it remained committed to both the Loughton project and the UK, while continuing to explore alternative power sources and additional development opportunities.
