Microsoft drops Nscale’s Essex AI datacentre project over power supply concerns

Microsoft has withdrawn from an agreement for British company Nscale’s large AI datacentre project in Loughton, Essex. The decision followed concerns about the site’s power supply.

Microsoft was expected to be one of the project’s largest customers and its anchor tenant. The withdrawal leaves Nscale without a publicly announced customer for the Essex facility.

Grid problems threaten the launch

The datacentre was planned to open next year. A month before Microsoft’s decision, reports said power supply problems could delay the site’s connection for a lengthy period.

Questions about the location had already grown after the Guardian reported in March that the Loughton site was still operating as a scaffolding yard.

Government promoted the facility

Keir Starmer’s government highlighted the project in its 2025 AI strategy, calling it “the largest UK sovereign AI datacentre”. Datacentres provide the computing infrastructure used by technologies including chatbots.

Nscale, backed by technology companies including Nvidia, presents itself as Britain’s sovereign datacentre provider. Losing the project’s anchor tenant could complicate the company’s plans for a Wall Street listing this year at a potential valuation of $35bn (£26bn).

Nscale said it remained committed to the Loughton project and the UK, while exploring alternative power sources and other UK expansion sites. The company said its long-term relationship with Microsoft remained strong and that the London-wide grid issue did not affect its other contracts.

Microsoft is understood to remain involved in another Nscale project in Norway.