The UK data centre boom and its challenges

Demand has increased rapidly over the past five years, driven by the growth of artificial intelligence and high-performance computing, the continued expansion of cloud and hyperscale platforms, and the increasing requirements around data security and digital sovereignty. This growth is reflected in power consumption, with the UK data centre electricity demand reaching approximately 8.3 TWh in 2024, a significant increase from 3.6 TWh in 2020 [1].

Our experts are actively working with data centre clients across the UK, supporting them across a range of areas including financial model audit, assurance and due diligence. This article is the first in a series that will explore the market from the perspective of our clients, focusing on the key themes shaping the sector. Here, we set out the fundamental drivers of growth and outline some of the initial challenges developers are currently facing.

What is driving the growth in data centre demand?

Demand for data centre capacity in the UK is being driven by a combination of structural and technology-led factors.

Artificial intelligence and cloud adoption are increasing demand for data centre capacity in the UK. AI usage across UK businesses has risen from approximately 9% in 2023 to around 23% in 2025, increasing the need for high-density computer infrastructure. Cloud adoption is already widespread, with around 69% of UK firms using cloud-based systems, and it underpins most AI deployment [2]. Together, these trends are driving sustained demand for large-scale and specialised data centre capacity.

There is also a growing focus on data security and digital sovereignty. Organisations are placing greater importance on where data is stored and processed, particularly for sensitive or regulated workloads. This is contributing to demand for domestic data centre capacity within the UK. In parallel, the UK Government has formally recognised the strategic importance of the sector by designating data centres as Critical National Infrastructure in 2024, placing them alongside sectors such as energy and water [3]. This classification reflects the role data centres play in supporting essential services and the wider economy and reinforces their importance within national infrastructure planning.

How is the UK data centre market structured today?

The UK data centre market includes a range of facility types, which differ by function, customer base and scale. These distinctions are important when assessing demand, development requirements and investment activity. Facilities range from:

Retail data centres which consume relatively small amounts of space and power (1-5 MW) and serve multiple customers, often enterprises, on flexible contracts.
Wholesale data centres that provide much larger blocks of capacity and consume significant power (100 MW). They are typically hosted in entire floors or buildings and serve a smaller number of customers, like cloud providers or large corporates, usually on long-term contracts.
Hyperscale data centres which are very large facilities, consuming massive amounts of power (1 –2 GW), operated by global cloud and technology companies to support massive, standardised computing workloads.

The market can also be understood by operator type. It includes hyperscale operators such as Amazon Web Services, Microsoft Azure and Google Cloud, alongside colocation providers such as Equinix and Digital Realty. These different models have distinct requirements in terms of scale, power and location. However, new development is increasingly driven by hyperscale data centres, which accounted for over 60% of construction activity in 2025 and are expanding to support cloud and AI workloads. Edge data centres remain a smaller segment, representing approximately 15% of development activity, typically focused on low-latency applications [4].

Geographically, the market is concentrated in London and the Southeast, which account for more than 80% of the UK capacity. Other clusters include Newport/Cardiff and Manchester, although these remain smaller in scale. There are estimated to be over 500 data centres across the UK, depending on classification [5].

This concentration is beginning to shift as developers look for locations with better access to power and more flexible planning environments. Scotland is increasingly being considered as a potential growth market, supported by access to renewable energy, land availability and policy support for digital infrastructure. In 2025, Scotland attracted about 8% of investment in UK Data Centre construction, which is proportionate to the size of Scotland's GDP. We will explore the specific factors contributing to Scotland’s attractiveness in the next article of this series.

What challenges are affecting data centre development in the UK?

Access to power is the primary constraint on new data centre development in the UK. Securing a grid connection is a critical step in the development process, with typical timelines ranging from five to ten years, and in some cases extending further due to network constraints and connection queue backlogs [6].
Planning and permitting: while there is increasing policy recognition of the importance of data centres, the planning process is still evolving. Developers are required to address local planning policies, environmental considerations and community concerns, all of which can extend timelines and increase development costs.
Location decisions are becoming more complex. Developers must consider power availability, land pricing, planning feasibility, connectivity and long-term expansion potential when selecting sites. This is contributing to increased interest in regions outside the South-East, although London is projected to remain the major hub for the growth of data centres in the UK over the next few years.
Cybersecurity is a significant and growing challenge for data centres in the UK. Data centres are increasingly exposed because they underpin cloud services, government systems, healthcare, energy networks and financial services, making them high‑value targets. Our tech and digital team helps clients with data centre accreditation and assurance to achieve cyber resilience and comply with international cyber risk management protocols.

The value of data centre assets is closely linked to how effectively these challenges are managed. Access to power, planning certainty and location strategy are key factors in determining the attractiveness and performance of an asset.

In future articles in this series, we will uncover details on data centre valuation, transaction dynamics, financial model construction and the factors that distinguish high‑quality assets in this rapidly evolving sector.