Microsoft pulls out of Loughton AI datacentre project over power issues

Microsoft has terminated its agreement to act as anchor tenant for Nscale’s planned artificial intelligence supercomputer facility in Loughton, Essex, according to reporting first published by The Telegraph on Sunday, 18 October 2026. The withdrawal strips the British cloud provider of its sole publicly announced customer for the UK site and creates a significant hurdle for the developer.

The facility was initially announced in 2025 as the country's largest sovereign AI datacentre, championed by government ministers under the administration of Keir Starmer. Originally slated to open next year, the project was designed to house a supercomputer powered by more than 23,000 Nvidia graphics processing units. Government figures previously highlighted the initiative as a cornerstone of Britain's digital economy strategy, while planning documents noted unusual intervention when Lord Stockwood wrote to local council chief executive Andrew Small to emphasize strong government support despite local council objections.

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Doubts regarding the timeline had already circulated before the withdrawal. Investigations by The Guardian revealed in March that the designated location remained an operational scaffolding yard, though Nscale subsequently cleared the site. More critically, electricity grid operators informed developers that sufficient power to run the facility would not be supplied until the early to mid-2030s. Industry observers note that for fast-moving artificial intelligence workloads, a queue stretching into the next decade represents a disqualifying bottleneck.

The sudden departure of Microsoft strips Nscale of its primary anchor tenant and sole publicly announced customer for the Essex development. Financial disclosures indicate that Microsoft and Anthropic have accounted for approximately 85% of Nscale's contracted demand, leaving the infrastructure provider exposed to single-tenant concentration risks. Market analysts suggest that losing this commitment could complicate Nscale's anticipated initial public offering ambitions on Wall Street.

Despite the cancellation of the Loughton agreement, representatives for Nscale insisted that the broader partnership between the two technology giants remains intact. Company spokespeople emphasized that Microsoft continues to collaborate with them on international digital infrastructure initiatives located overseas, including projects in Norway, Portugal, and the United States. Furthermore, Nscale asserted that the power constraints facing the Essex site stem from a regional grid capacity issue rather than internal engineering or commercial failures.

The grid connection delay experienced in Loughton is not an isolated incident. Across the country, developers of heavy-compute facilities face mounting backlogs as renewable energy deployment outpaces the modernization of ageing electrical transmission infrastructure. Similar capacity strains have driven developers in various markets to explore alternative power solutions, such as on-site solid oxide fuel cells from providers like Bloom Energy or alternative generation methods, to bypass sluggish utility connection queues.

Nscale stated that it remains committed to the UK market and is actively investigating alternative power generation strategies for the Loughton plot alongside other potential expansion locations. Meanwhile, industry watchers will monitor whether alternative tenants emerge or if grid constraints force a fundamental reassessment of where heavy compute assets can be realistically constructed over the coming years.