Microsoft has withdrawn from a UK artificial intelligence data centre agreement with the British start-up Nscale, a move that dents the country’s AI ambitions, the US tech firm confirmed on Monday. Microsoft had agreed last year to lease computing capacity from Nscale, an AI infrastructure provider backed by the chipmaker Nvidia, at a planned facility in Loughton, northeast of London.
A Microsoft spokesperson said the decision “relates to a single site” and added that the company still values its collaboration with Nscale, describing it as a continuing commitment.
Loughton site was part of a high-profile investment push
The deal was announced during President Donald Trump’s state visit to the UK last year, alongside a series of multi-billion-dollar investments from American technology groups that were promoted as turning Britain into an AI superpower. Former prime minister Keir Starmer had cited the Loughton location as the “largest UK sovereign AI data centre”.
Still, several data centre projects in Britain have struggled to move forward, with developers facing worries over high electricity prices and long waits to connect to the national power grid.
Nscale points to grid delays and other contracts
Nscale said it remained committed to the Loughton project and to the UK, and that it was exploring alternative power sources for the site as well as other expansion locations in the country. The company described its relationship with Microsoft as strong and long-term, and said the London-wide grid problem would not affect its other contracts.
UK media reported that grid officials had told Nscale the site would not have access to power until the 2030s. UK Power Networks, which does not disclose details of individual connections, said many data centres can connect to its distribution network but are waiting on work to the national transmission network, which it does not own.
Listing plans and earlier withdrawal by OpenAI
Nscale is preparing an initial public offering on the New York Stock Exchange, with reports suggesting it is targeting a valuation of up to $35 billion. In its IPO filing, the company said a large share of its committed revenue comes from a small number of customers with major contracts, namely Microsoft and the US AI firm Anthropic.
A person familiar with the matter said the Loughton deal accounted for only a small part of Microsoft’s agreements with Nscale. Earlier this year, ChatGPT maker OpenAI withdrew from a partnership with Nscale and Nvidia to set up a UK version of Stargate, a large-scale AI infrastructure initiative. According to British media, OpenAI blamed high energy costs and regulatory uncertainty for shelving that project.
