Microsoft has pulled out of Nscale's Loughton datacentre in Essex, the site the UK government once billed as the country's largest sovereign AI datacentre. The Guardian reports that Microsoft told Nscale it was ending its agreement over power supply concerns, which leaves Nscale without its only publicly announced customer for the project. The reason is not chips or demand. It is the electricity grid.
The details matter because Loughton was a flagship of the UK's AI plans, and because the same pattern, with a different local cause, is playing out in San Francisco, PJM and Thane in India. This post separates what is confirmed from what is still reported second-hand, and explains what it means for anyone who relies on AI capacity being built where it was promised.
TL;DR: what we know about Microsoft and Loughton
| Question | Answer |
|---|---|
| What happened? | Microsoft told Nscale it was pulling out of its agreement for the Loughton, Essex datacentre, per the Guardian |
| Who first reported it? | The Telegraph, according to the Guardian |
| Why? | Concerns over power supply to the site |
| Grid timeline? | UK Power Networks told Nscale it cannot supply enough power until the early to mid 2030s |
| Original plan? | A site opening in 2027, about 90 MW at full grid connection, roughly 2 billion pounds of investment |
| Is Microsoft done with Nscale? | No: it is understood to remain on board for a Norway project |
| What does Nscale say? | It remains committed to Loughton and the UK and is exploring alternative power |
| Has the project been cancelled? | Not by Nscale, in the statements we found |
Primary reporting: the Guardian, published October 18, 2026. We could not read the Telegraph original, so the claim that Microsoft ended its agreement rests on the Guardian's account of it. Microsoft had not published a statement in the material we reviewed.
What did the Guardian report?
The Guardian says the development by British company Nscale was planned to open at Loughton in Essex next year, and that Microsoft, "one of its largest planned customers and expected to have been the anchor tenant," informed the company it was pulling the plug on its agreement. It says the move comes a month after it emerged that power problems meant the project would face a lengthy wait before coming online.
Two things follow from the reporting. First, Nscale has lost the only publicly announced customer for the Essex site. Second, Microsoft is not abandoning Nscale as a supplier: it is understood to stay on for another Nscale project in Norway.
Nscale's spokesperson told the paper: "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." The spokesperson added: "Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts."
Read the wording carefully. Nscale calls the grid issue "London-wide," which frames it as a regional constraint rather than something specific to its site, and it does not dispute that Microsoft has stepped back from Loughton.
How did a flagship site end up without power?
The timeline is short, and every step is public.
- 2025: The UK government's AI strategy named Loughton as the "largest UK sovereign AI datacentre," and ministers focused on two Nvidia-backed firms, Nscale and CoreWeave. See our UK AI landscape guide for the policy backdrop.
- October 2025: Nscale signed a Microsoft deal reported at up to 14 billion dollars, covering about 104,000 Nvidia GB300 chips in Texas and 12,600 GPUs in Portugal, on top of an earlier 6.2 billion dollar Norway contract, according to European Business Magazine. That report put Loughton at 50 MW scalable to 90 MW with a go-live in the fourth quarter of 2026.
- March 2026: The Guardian found the planned site was still an operating scaffolding yard.
- July 2026: Reports said the roughly 90 MW grid connection would not be ready for a 2027 opening. The Next Web quoted an Nscale spokesperson saying "We remain fully committed to the Loughton project," and noted the investment at 2 billion pounds with Microsoft as anchor tenant.
- Early October 2026: UK Power Networks told Nscale it could not supply enough power until the early to mid 2030s, per the Guardian.
- October 18, 2026: Microsoft's exit is reported.
Note that the earlier reporting varies on who the bottleneck is: some outlets point to the national transmission network, and the Guardian names UK Power Networks, the distribution operator for London and the south east. UKPN has said generally that many datacentres connected to distribution networks are waiting on wider transmission upgrades before they can operate, without commenting on Nscale specifically, according to coverage summarised by City AM.
A data centre and compute illustration, representing the Loughton datacentre site waiting for a power connection
Why does power now decide where AI gets built?
For two years the headline constraint on AI was GPUs. In 2026 the story has shifted to power and the time it takes to get it. A 90 MW site is not large by the standards of US campuses, but connecting it still requires network reinforcement that takes years to plan, permit and build.
The same constraint appears across our recent coverage:
- Utilities and regulators are fighting over who should be curtailed first when demand spikes, as in the FERC decision on PJM's plan.
- Cities are pausing approvals while they work out rules, as in the San Francisco moratorium.
- Hyperscalers are buying generation directly, such as Google's 890 MW of nuclear uprates.
- Communities are pushing back on water and power, as in the Thane protests against an Amazon site.
- Even the components are tight: Lumentum says optical parts are sold out through early 2029.
Loughton adds a clear example of the failure mode: a site can have land, financing, chips on order and a government endorsement, and still be stranded for a decade by the wire that is supposed to feed it.
A meter with a green needle, illustrating the megawatt power demand that a UK AI datacentre needs from the grid
What does this mean for Nscale and the neocloud model?
Nscale is a "neocloud," one of a group of Nvidia-linked companies that build and rent out GPU capacity. The Guardian notes that Nscale is backed by Nvidia and had been aiming to list on Wall Street this year at a potential 35 billion dollar valuation, and that the loss of an anchor tenant at Loughton "could undermine" that ambition. It also notes a growing chorus saying neoclouds may be a vulnerability in the wider AI economy as delays pile up across partners, and that many of them are taking on increasingly risky debt.
That is the paper's characterization, not a finding we can verify. What we can verify from public reporting is narrower:
- Nscale's headline Microsoft contracts in Norway, Texas and Portugal are separate from Loughton, and the Guardian says the Norway project continues.
- Nscale is a company that, as of the October 2025 report, had not yet completed a greenfield facility from scratch.
- The Loughton customer commitment, which is the revenue that justifies the build, has now been withdrawn.
For a neocloud, a signed customer contract is what lets it raise debt for chips and buildings. Losing one for a specific site does not remove the others, but it makes lenders and prospective public-market investors ask what happens to the remaining pipeline if each site depends on a similar grid connection. We keep this in the news-and-explanation lane: we are not making any statement about the company's finances beyond what the sources say. For the broader financial debate, our AI bubble reality check lays out the competing views.
What does it mean for UK sovereign AI compute?
The UK government has tied its AI strategy to domestic compute, and it announced Loughton as a showcase. If the biggest announced site cannot connect until the 2030s, the practical effect is that UK-based researchers and companies will keep depending on capacity located elsewhere, or on smaller sites that can connect sooner. The government has so far favoured speed: the Guardian's related headlines mention Ofgem proposing fees for grid access to ease the connection queue, and debates over planning in Scotland.
There is also a related thread in research compute. NVIDIA recently pledged compute for UK safety research, which we covered in NVIDIA's 250 million dollar agentic AI safety compute commitment. That kind of commitment still needs capacity to run on, and the UK's power queue is one reason the location of that capacity is not guaranteed.
What can Nscale actually do about it?
Nscale says it has cleared the scaffolding yard and is investigating whether it can generate power on site and whether it can speed up the grid connection process. Options that operators generally consider in this situation include:
| Option | Trade-off |
|---|---|
| Wait for the grid reinforcement | Predictable, but the stated horizon is the early to mid 2030s |
| On-site gas or fuel cell generation | Faster, but costlier, needs permits and raises emissions or fuel supply questions |
| Smaller initial phase | Lower capacity, may not satisfy an anchor tenant sized for the full site |
| Move capacity to another UK site | Needs land, planning permission and its own grid connection |
Earlier reporting mentioned talks with a fuel cell maker for on-site generation; none of the sources we reviewed confirms a signed deal. Treat any specific supplier named in secondary coverage as unconfirmed until Nscale or the supplier says so.
What should builders and readers take from this?
If you buy cloud AI capacity or plan around a region, three practical points follow.
- Region availability is not guaranteed by an announcement. A site that is announced, financed and endorsed can still slip by years. If your roadmap depends on a particular country having local capacity, ask the provider for the committed energisation date, not the opening date.
- Data residency plans need a fallback. If you chose a UK or EU region for compliance, check which sites actually serve it today. Our UK AI landscape guide covers the regulatory side.
- Watch capacity, not only model prices. Cheap tokens depend on built infrastructure. When power is the limiter, expect capacity to concentrate where grids already have headroom.
What we do not know yet
- Whether Microsoft will make a public statement or has other UK plans.
- Whether Nscale has found another anchor tenant for Loughton, or will build a smaller first phase.
- Whether the early to mid 2030s grid date can be shortened by reinforcement, a different connection point, or on-site generation.
- How the news affects Nscale's reported IPO timing.
- Whether the government will respond with changes to its grid queue process.
We will update this post as Nscale, Microsoft, UK Power Networks or the government publish more. Use the Guardian piece and Nscale's own channels as the primary references until then.
Related reading
- San Francisco's data center moratorium
- FERC rejects PJM's curtail-first plan
- Google and Constellation: 890 MW of nuclear uprates
- Amazon Thane data center protests
- UK AI landscape in 2026
- Figure's 100,000 GPU deal with Nscale
- The AI bubble in 2026: a reality check
Details are accurate as of October 18, 2026 and may change as Nscale and Microsoft comment.