Microsoft Pulls Out of Nscale’s Loughton AI Data Centre

Microsoft has pulled out of its agreement to use Nscale’s planned AI data centre in Loughton, Essex, after the British company was told the site may not get a full grid connection until the 2030s, according to reports on Sunday, Oct. 18, 2026, by the Telegraph, the BBC and the Guardian. The move leaves the £2 billion Nscale Loughton project without its only publicly announced customer.

Image: Server racks inside a data center. Photo: Carl Lender, via Wikimedia Commons (CC BY 2.0).

What happened to the Nscale Loughton deal

The Telegraph first reported on Sunday that Microsoft had terminated its involvement. The BBC said it understood Microsoft, which had said it would fund a supercomputer at the site, had ended the arrangement. The Financial Times described the deal as a lease of computing capacity. Microsoft declined to comment to the BBC.

The Guardian reported that Microsoft was expected to be the anchor tenant and that the company remains on board for a separate Nscale project in Norway. Nscale told the BBC it is still working with Microsoft in Norway, Portugal and the United States.

The timing stands out. Only last month, Microsoft said part of the $30 billion (£22 billion) it is investing in the UK would go toward the Loughton supercomputer, the BBC noted.

The power problem behind the pullout

The trouble is electricity. Earlier this month, UK Power Networks, which runs the grid across London and the south-east of England, told Nscale it could not supply enough power to Loughton until the early to mid-2030s, the Guardian reported. The site had been scheduled to receive power at the end of this year and to open in 2027.

Questions about the project had been building for months. In March, the Guardian reported that the planned location was still an operating scaffolding yard. In September, the paper reported that power supply problems meant the facility would miss its 2027 launch and could slip into the mid-2030s. Nscale has since cleared the yard and is examining on-site power generation and ways to speed up its grid connection.

In a statement to the BBC and the Guardian, an Nscale spokesperson said: “We remain committed to both the Loughton project and the UK, and we are exploring alternative power sources for the site, in addition to other expansion sites in the UK. Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts.”

Why this matters for the UK’s AI plans

The UK government highlighted Loughton when it announced its AI strategy in 2025, describing it as the “largest UK sovereign AI datacentre,” according to the Guardian. The site is expected to create 250 permanent jobs once it opens, the BBC reported.

Nscale is a so-called neocloud, one of several companies with close ties to Nvidia that rent out AI computing power. It has positioned itself as Britain’s “sovereign” data centre provider and has been aiming for a New York listing with a potential valuation of about $35 billion (£26 billion), the Guardian said. Bloomberg, citing the Telegraph, said the setback comes at a critical moment for those IPO hopes. Former UK deputy prime minister Nick Clegg and former Meta chief operating officer Sheryl Sandberg sit on Nscale’s board.

The UK’s AI push has leaned heavily on two Nvidia-backed companies, London-based Nscale and U.S. firm CoreWeave, according to the Guardian. Official figures show AI investment is among the factors helping Britain’s economy beat expectations of weaker growth this year, the paper added, which raises the stakes when a flagship project stalls.

The bigger picture: power is the new AI bottleneck

The Loughton setback is one of the clearest examples yet of how electricity, not chips, is becoming the limiting factor for AI infrastructure. Large AI data centres draw enormous amounts of electricity, and Nscale itself called the problem a “London-wide grid issue” rather than something unique to its site. The Guardian noted a growing chorus of voices warning that neoclouds, many carrying heavy debt, could be a weak point in the wider AI economy as delays pile up.

For Microsoft, the decision appears limited to this one site. For Nscale, the next steps are finding new power, a new anchor customer, or both, while keeping its listing plans on track.

The story fits a wider pattern of governments and companies racing to secure AI capacity. The Boston Report recently covered Taiwan’s plan for a $4 billion Texas park for AI chip suppliers and examined the state of the U.S. economy, where AI spending has been a key driver. Closer to home, see our look at what Schneider Electric’s PTC deal means for Boston.

Sources

• BBC: Microsoft pulls out of Nscale’s Essex AI data centre
• The Guardian: Microsoft pulls out of AI datacentre project in Essex over power supply concerns
• The Guardian: Launch of UK’s ‘largest AI supercomputer’ delayed by power supply problems
• Financial Times: Microsoft pulls plug on Nscale data centre deal
• Bloomberg: Microsoft Scraps UK Data Center Deal With Nscale, Telegraph Says