Microsoft has withdrawn from an agreement to lease computing capacity at a planned AI data centre in Loughton, Essex, operated by British cloud infrastructure provider Nscale, amid reported delays in securing electricity for the facility.

The withdrawal was first reported by The Telegraph on October 18th. According to Reuters, Microsoft recently terminated its agreement for the project, although the company has not publicly explained its decision.

The facility was intended to support Microsoft’s Azure cloud services. Nscale has maintained that it will proceed with the development despite losing its main customer.

Power delays disrupt Nscale’s data centre plans

Nscale first announced the Loughton development in January 2025, targeting the fourth quarter of 2026 for the facility to become operational. The company planned to provide an initial 50 megawatts (MW) of AI computing capacity, expandable to 90MW, using liquid cooling to support high-density GPU deployments.

In September 2025, Nscale announced an agreement with Microsoft to deploy 23,040 Nvidia GB300 GPUs at the facility, with delivery scheduled for the first quarter of 2027. The computing infrastructure was intended to support Azure services in the UK.

However, the project has encountered delays in securing the electricity needed to operate the facility. According to The Guardian, UK Power Networks informed Nscale that sufficient power would not be available until the early to mid-2030s, several years after the originally planned opening.

Microsoft was expected to be the main customer for the Loughton facility. Its withdrawal leaves Nscale without a publicly announced replacement customer for the site, although the company has maintained that the project will proceed.

Nscale said it is examining alternative electricity sources and additional sites in the UK. The company has not provided a revised timetable for Loughton or confirmed when sufficient power will become available.

“Our relationship with Microsoft remains strong and long-term,” an Nscale spokesperson said in a statement to Reuters. The spokesperson added that the electricity grid problems would not affect the company’s other contracts with Microsoft.

Microsoft declined to comment on the reported termination.

Microsoft’s withdrawal changes Nscale’s commercial position

Microsoft had agreed to lease the initial 50MW of computing capacity at Loughton, according to the Financial Times. Its withdrawal leaves Nscale seeking another customer for the facility.

The cancellation comes after Nscale filed for a US initial public offering (IPO) in September 2026. The Nvidia-backed company disclosed details of its contracts and computing capacity in a registration statement with the US Securities and Exchange Commission (SEC).

According to the filing, Nscale had approximately $103.4 billion in active and contracted total contract value as of August 31st, up from $38 billion at the end of 2025. The agreements covered approximately 461,000 GPUs that were either active or contracted.

Of the $103.4 billion total, approximately $2.6 billion represented active contract value. Nscale also reported around 25,000 active GPUs out of 461,000 active and contracted GPUs as of August 31st.

The company said its agreements are primarily structured as long-term take-or-pay contracts, under which customers commit to paying for specified computing capacity over an agreed period.

The figures cover Nscale’s wider contract portfolio rather than revenue generated from Loughton. The company has not disclosed the value of the terminated agreement or how Microsoft’s withdrawal affects its reported contract total.

The Essex facility was also part of Microsoft’s wider AI infrastructure investment plans in the UK. In September 2025, Microsoft announced plans to invest $30 billion in the country over four years, including spending on AI infrastructure and cloud operations.

Microsoft’s relationship with Nscale also extends beyond Loughton. The companies have separate AI infrastructure agreements covering facilities in the United States, Portugal, and Norway, which Nscale said remain unaffected by the Essex project’s electricity supply problems.

Nscale has also explored on-site electricity generation and ways to accelerate access to grid power, according to The Guardian. Its September SEC filing describes behind-the-meter power infrastructure at large AI campuses, although the company has not confirmed whether such a system will be installed at Loughton.

UK seeks to reform data centre grid connections

The delays affecting Loughton come as UK energy regulator Ofgem seeks to address a backlog of electricity grid connection applications, including those from data centre developers.

In July, Ofgem reported that demand connection applications had risen from 41 gigawatts (GW) to 125GW in less than a year. Data centre projects accounted for at least 80GW of that total.

The increase occurred between November 2024 and June 2025. Ofgem said some projects in the queue might never proceed, potentially delaying developments that are ready to connect and making electricity network planning more difficult.

To address the backlog, Ofgem proposed introducing a commitment fee of between £237,500 and £712,500 per megawatt for large data centre developments accepting grid connection offers. The proposed range represents approximately 2.5% to 7.5% of average project costs.

The fee would be refunded when a project reaches energisation but forfeited if the developer exits the connection queue early. The regulator said the measure is intended to discourage speculative applications from reserving grid capacity.

Ofgem also proposed project milestones requiring developers to demonstrate progress through evidence of financial capability, commercial readiness, and equipment procurement. These requirements would apply to qualifying projects seeking to retain their position in the connection queue.

“The connections system must work for consumers and for the projects that are ready to invest, build and connect,” Eleanor Warburton, Ofgem’s director for energy system design and development, said.

The proposals form part of a wider programme involving Ofgem, the UK government, and the National Energy System Operator to reform electricity demand connections. The programme covers queue management, infrastructure planning, and measures to accelerate physical grid connections.

Ofgem has not linked the proposed reforms to Microsoft’s withdrawal from Loughton. The measures remain subject to a final regulatory decision.

Ofgem’s consultation officially closed on September 17th, with the proposed commitment fees and project requirements still awaiting a final regulatory decision.

(Photo by Winston Chen)