Microsoft has withdrawn from a major artificial intelligence datacentre project in Essex, dealing a significant setback to the UK government’s plans for domestic computing infrastructure. The decision by the tech giant to pull out of the agreement with British firm Nscale was driven by concerns regarding power supplies at the site.
Anchor Tenant Withdrawal
The development, located in Loughton, was originally heralded by UK ministers as the country’s largest AI datacentre when it was announced in 2025. Microsoft was expected to serve as the anchor tenant for the facility, which was planned to open the following year. The loss of this commitment means Nscale has lost its only publicly announced customer for the Essex site.
According to reports, Microsoft informed Nscale of its decision to end the agreement. The withdrawal follows earlier doubts about the scheme, including revelations that the designated location was still an operational scaffolding yard. Further delays were anticipated due to power supply issues that were expected to push back the project’s timeline.
While Microsoft has exited the Essex deal, it remains involved in another datacentre project the company has in Norway. The specific reasons for the withdrawal were attributed to a “London-wide grid issue” by Nscale, rather than a direct rejection of the Loughton site’s viability.
Impact on Sovereign AI Ambitions
The project had been highlighted by Prime Minister Keir Starmer’s government as a cornerstone of the UK’s AI strategy. Ministers described the Loughton facility as the “largest UK sovereign AI datacentre” when the strategy was unveiled in 2025. Datacentres serve as the central infrastructure for AI technologies, including chatbots and large language models.
Nscale, which is backed by technology companies including Nvidia, has positioned itself as a provider of “sovereign” datacentre services in Britain. The withdrawal of Microsoft poses a challenge to the company’s broader ambitions, which include a potential flotation on Wall Street this year. The company had previously targeted a valuation of $35bn (£26bn).
An Nscale spokesperson stated that the company remains committed to the Loughton project and to the UK market. The spokesperson added that the firm is exploring alternative power sources for the site and looking at other expansion opportunities within the country.
“Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts,” the spokesperson said. The company emphasized that it is continuing to work on the Loughton development despite the loss of its primary customer.
Source: The Guardian
