Microsoft has pulled out of a planned AI datacentre at Loughton in Essex, England, the Guardian reported on October 18, leaving the developer Nscale without its only publicly announced customer for a site the UK government has promoted as its largest sovereign AI datacentre. The reason given is power: the local grid cannot supply enough electricity for years.

What happened

The Guardian reports that Microsoft, expected to be the anchor tenant, told Nscale it was ending its agreement for the Loughton project, which had been due to open next year. The news was first reported by the Telegraph. It came about a month after UK Power Networks, which maintains the electricity grid across London and the south-east of England, told Nscale it would not be able to supply enough power to the site until the early to mid-2030s.

Nscale said it is “committed to the project” and to the UK, is exploring alternative power sources for the site, including generating power onsite and speeding up the grid connection, and has other expansion sites in the country. A spokesperson said its relationship with Microsoft “remains strong and long-term” and that the “London-wide grid issue” has no effect on its other contracts. Microsoft is understood to remain on board for another Nscale project in Norway.

A project under scrutiny

Doubts about Loughton predate the Microsoft decision. The Guardian revealed in March 2026 that the site was still an operating scaffolding yard; Nscale has since cleared it. The UK government highlighted the project when announcing its AI strategy in 2025, calling it the “largest UK sovereign AI datacentre.” Its AI plans have leaned on two Nvidia-backed companies, Nscale and the US firm CoreWeave, both so-called “neoclouds” that build and rent out GPU capacity.

The setback matters financially as well. Nscale, backed by Nvidia and other tech companies, has been aiming to list on Wall Street this year at a potential valuation of $35 billion, according to the Guardian. The loss of an anchor tenant may weaken that story. The Guardian also notes that the AI boom is driving many companies, including ones critical to it, into increasingly risky debt, and that a delay to a New York listing would put such vulnerabilities in sharper focus.

Power is the bottleneck

The case is a clear example of a wider constraint: in many regions, the limiting factor for AI infrastructure is no longer chips or buildings but grid connections. A large AI campus can draw as much electricity as a small city, and utilities need years to build substations and lines. The Guardian lists other recent UK developments pointing the same way, including a suspension of planning permission for new Scottish AI datacentres for up to a year, a proposal from the regulator Ofgem for projects to pay fees for grid access to ease the connection queue, and research suggesting datacentres use about 6% of electricity supply in the UK and US. We cover the energy numbers in how much energy AI uses and the money in AI data center capex explained.

For tenants like Microsoft, the arithmetic is simple. Capacity that cannot be energized for roughly a decade is of no use to a company that needs compute within a couple of years, so it makes sense to commit to sites with firm power, such as the Norwegian project.

Why it matters

Governments pursuing “sovereign AI,” meaning domestic compute under national control, need power policy to match. Announcing a flagship site does not help if the grid cannot serve it. Our explainer on sovereign AI describes why countries want this capacity. The Loughton story shows how quickly the plan can stall when electricity, planning and financing do not line up, and it hints that investors will increasingly judge datacentre projects by their secured power rather than their announced scale.

What to watch next

  • Whether Nscale secures a new anchor tenant or a workable onsite power plan for Loughton.
  • Any change to the timing or valuation of Nscale’s planned stock market listing.
  • Ofgem’s final rules on grid access fees and the connection queue.
  • Other hyperscaler decisions on UK sites with grid constraints.
  • Government statements on how the sovereign AI strategy adapts.

Key takeaways

  • Microsoft ended its anchor tenant agreement for Nscale’s Loughton datacentre.
  • UK Power Networks said full power may not be available until the early to mid-2030s.
  • Nscale says it remains committed and is exploring onsite generation.
  • Microsoft is understood to stay involved in an Nscale project in Norway.
  • Grid power, not hardware, is now a gating factor for AI buildouts.

Frequently asked questions

Is the Loughton datacentre cancelled?

No. Nscale says it remains committed to the project, but it has lost its only publicly announced customer and faces a long wait for grid power.

Why can’t the grid just supply more power?

Connecting a very large load requires new substations and transmission, which take years to plan and build, and many connection requests are queued.

Does this affect Microsoft’s other UK plans?

The Guardian report covers only the Loughton project. It says Microsoft is understood to remain involved with another Nscale project in Norway.