UK Election Could Potentially Unlock Access to New Data Center Capacity

The change in the UK government following the general election on July 4 is also leading to a change in the country’s planning policies for data center construction.

The new Labour government is reconsidering two urban planning decisions that had put the brakes on data center investments. This policy shift is expected to unlock substantial new data center capacity, addressing both regional and national economic needs.

In her first speech as Chancellor of the Exchequer, Rachel Reeves emphasized the importance of data centers to economic development and said that when the new government intervenes in the economic planning system, the benefit of development will be a central consideration.

The Labour Party had talked about removing planning barriers to data centers before the election too, writing in its manifesto: “We will ensure our industrial strategy supports the development of the Artificial Intelligence (AI) sector [and] removes planning barriers to new datacentres.”

Reeves reaffirmed the government’s pledge to overhaul the National Planning Policy Framework by the end of the month. This framework, which directs major developments through the planning process, currently does not address data centers.

Neil Shah, VP for research at Counterpoint Research, said, “The new government’s focus looks like will be on building robust infrastructure for digital innovation which is driven by onset of AI and data centers which has become national agenda for many economies to thrive in this new digital era.”

Already, Deputy Prime Minister Angela Rayner, who also leads the Department for Levelling Up, Housing and Communities, has decided to reconsider two planning applications for proposed data centers, in Buckinghamshire and Hertfordshire, that were previously rejected by local authorities.

According to, the proposals, both by investment company Greystoke Land, were for an 84,000 square-meter facility in Hertfordshire, and a 72,000 square meter facility in Buckinghamshire.  

Governments may have the power to approve planning applications, but city planners aren’t the only brake on data center construction: The capacity of electrical distribution networks is a factor, too, and the overloaded network to the West of London is putting data centers in competition with new housing development.

In 2022, the Greater London Authority (GLA) released a report titled “West London Electrical Capacity Constraints,” indicating that new electrical installations over about 1MW in the London boroughs of Ealing, Hillingdon, and Hounslow would have to wait “several years” for connection to the distribution network.

The new government’s policy changes, experts say, will also have a flywheel effect where this policy focus will bring in billions of dollars of investments from likes of Amazon and others building more cutting edge infrastructure for AI as well as more jobs, potentially leading to a greater need for new housing in the area.

Market researcher Arizton Advisory & Intelligence forecasts that investment in UK data centers will rise at 2.7% a year to reach $10.13 billion in 2029. There are plenty of blockbuster projects contributing to this total: In January this year, Google announced investment of $1 billion to set up a data center in Waltham Cross, Hertfordshire, while in November Microsoft announced plans to invest $3.2 billion over three years to set up AI data centers in the UK.

But, said Counterpoint’s Shah, “Strong energy infrastructure to support this growth is of paramount importance, especially from a capacity and sustainability perspective.”

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