Microsoft has pulled out of its agreement to be the anchor tenant at a planned AI datacentre in Loughton, Essex, being developed by British infrastructure company Nscale, according to reports first published by The Daily Telegraph and confirmed by other outlets on 18 October 2026.
The site had been promoted by Nscale and government figures as set to become one of the largest AI computing facilities in the UK when it was unveiled in September 2025, as part of a wider package of AI infrastructure announcements involving Microsoft and Nvidia.
Why Microsoft withdrew
The decision centres on electricity supply. UK Power Networks, the regional grid operator, told Nscale it would not be able to deliver sufficient power to the Loughton site until the early-to-mid 2030s, well beyond the facility's planned 2027 opening. The delay would have left Microsoft's planned computing hardware deployment stranded for years.
Nscale said in a statement that it remains committed to the site. "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," a company spokesperson said. The company added separately that the issue reflects a broader London-area grid constraint and that its relationship with Microsoft on other contracts, including a facility in Norway, is unaffected.
Nscale is reported to be examining on-site power generation as a workaround, including discussions with Bloom Energy, a California-based maker of solid-oxide fuel cells that generate electricity from natural gas. Bloom Energy has not commented publicly on the reports.
The project's path so far
Epping Forest District Council approved planning permission for the Loughton site despite objections from the local town council and its own landscape and urban design teams, who raised concerns about water and power demand. Council officers cited a letter from Lord Stockwood, the UK's Minister for Investment, who had described the project as important to the "UK-US technological partnership" and said the government was "keen to see the successful delivery of this site."
What is confirmed and what is not
Nscale's Loughton datacentre: plan versus current status| Metric | Announced (Sept 2025) | Status (Oct 2026) |
|---|
| Anchor tenant | Microsoft | No replacement announced |
|---|
| Site investment | £2 billion (Nscale) | Unchanged, per Nscale |
|---|
| Grid connection target | In time for opening | Not before early/mid-2030s, per UK Power Networks |
|---|
| Planned opening | 2027 | Delayed; new timeline not confirmed |
|---|
| Scalable capacity | Up to 90 megawatts | Unchanged on paper |
|---|
Figures for the number of computing chips planned for the site vary between outlets and have not been confirmed by Microsoft or Nscale directly in on-the-record statements reviewed for this piece; this detail is therefore not stated as fact here.
Wider context
The withdrawal comes as Nscale, backed by Nvidia, is pursuing a US stock market listing reportedly seeking to raise up to $3 billion at a valuation of around $35 billion (about £26 billion). Microsoft and Anthropic are reported to account for roughly 85% of Nscale's existing contracts, making the loss of Microsoft as the Loughton tenant significant for investor confidence ahead of the listing.
According to reporting on Nscale's listing plans, other AI infrastructure firms, including US cloud-computing company CoreWeave and Australian developer Firmus, have faced comparable setbacks linked to questions about data-centre demand and delivery timelines. Separately, investment bank TD Cowen reported in 2025 that Microsoft had cancelled roughly a couple of hundred megawatts of planned US datacentre leases, citing facility and power delays alongside a reassessment of capacity needs.
UK industry figures cited in trade reporting estimate that more than a quarter of UK data-centre capacity due in 2025 slipped because of grid delays, with over 100 UK projects said to be considering on-site gas generation while they wait for grid connections.
Questions
- Why did Microsoft pull out of the Essex AI datacentre project?
- UK Power Networks told developer Nscale it could not connect the Loughton, Essex site to the electricity grid until the early-to-mid 2030s, far later than the facility's planned opening, so Microsoft withdrew as anchor tenant.
- Where exactly is the datacentre, and who is building it?
- The site is in Loughton, Essex, and is being developed by British AI infrastructure company Nscale, which is backed by Nvidia.
- Does Nscale still plan to build the Loughton datacentre?
- Yes. Nscale says it remains committed to the site and is exploring alternative power options, including on-site generation and talks with fuel-cell maker Bloom Energy, as well as other UK expansion sites.
- Does this affect Microsoft's other deals with Nscale?
- According to Nscale, no — the company says its relationship with Microsoft on other contracts, including a facility in Norway, is unaffected and describes the Loughton issue as a regional grid problem.
- Is the UK grid delay unique to this one project?
- No. Trade reporting cited in coverage of this story estimates that more than a quarter of planned 2025 UK data-centre capacity was delayed by grid connection issues, with over 100 projects considering on-site gas generation as a workaround.
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