Microsoft pulls out of UK Nscale data centre deal over power delay

By Paul Sandle

LONDON, Oct 19 (Reuters) - Microsoft has pulled out of a deal to anchor a flagship data centre for Nvidia-backed Nscale after power connection delays pushed its expected supply date into the 2030s, highlighting a major obstacle to Britain's AI ambitions.

The US tech giant said on Monday it remained committed to its partnership with Nscale, including work to build digital infrastructure and support AI growth globally.

"This decision relates to a single site," a Microsoft spokesperson said of its termination of an agreement for the data centre in Loughton, Essex, where Nscale had faced delays, with electricity grid officials telling the AI company they did not expect to supply power to the site until the 2030s.

"Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts," a spokesperson for Nscale told Reuters.

"We remain committed to both the Loughton project and the UK, and we are exploring alternative power sources for the site, as well as other expansion sites in the UK," they added.

Microsoft's move was first reported by the Telegraph newspaper.

The project was among technology deals announced during US President Donald Trump's visit in September 2025 and intended to showcase Britain's ambition to become a global AI leader.

But that faces a major constraint in the form of electricity supply, with bottlenecks in grid connection queues delaying data centre projects by as long as 13 years.

The Loughton site was due to begin operating early next year, with 23,040 Nvidia GB300 GPUs providing 50 megawatts of AI computing capacity to help power Microsoft's Azure services in Britain, the companies said last year.

Nscale filed for an initial public offering in the United States last month, with Microsoft and Anthropic expected to be among its major customers, according to its prospectus.

The group provides infrastructure, including computing capacity, power and data centres, as well as software for training and running AI models.

Nscale has grown rapidly since launch, increasing its total contracted value from $100 million to more than $103 billion in two-and-a-half years. It competes with AI infrastructure providers CoreWeave, Nebius, Crusoe and Lambda.

(Reporting by Nethra Sailesh and Gnaneshwar Rajan in Bengaluru and Paul Sandle in London; Editing by Joe Bavier and Alexander Smith)