Microsoft has reportedly pulled out of a deal with Nscale under which it would have been the anchor tenant for a major UK data center, over concerns about the power supply.

The development, in Loughton, Essex, was set to deliver 50 MW of AI capacity, scalable to 90 MW, and to initially house 23,040 NVIDIA GB300 GPUs. It’s expected to create 250 permanent jobs.

But now, according to the Daily Telegraph, power supply problems mean that the project will face significant delays. UK Power Networks (UKPN), which owns the electricity grid across London and the south-east of England, is believed to have told Nscale that it won’t be able to supply enough power to the site until the early to mid-2030s. The development was originally set to be finished early next year.

The two companies are still working together on projects in Norway, Portugal and the US – although the Norway facility is believed to be behind schedule too.

“We remain committed to our partnership with Nscale, including work to build robust digital infrastructure and support AI growth globally,” a Microsoft spokesperson told ITPro. “This decision relates to a single site.”

Supplying adequate power to data centers is becoming an increasing problem, with Gartner warning as far back as two years ago that 40% of data centers could face constraints in power availability by 2027.

And late last year, a report from Savills found that the issue is slowing data center construction, with only 850MW of power capacity delivered across EMEA since the start of 2025, down by 11% compared with the same period in the previous year. New transmission, distribution, and generation capacity could take years to come online, said the firm.

UKPN recently signed up as a strategic partner of the Data Centre Alliance (DCA) as part of efforts to strengthen engagement with the data center sector and ease supply problems, publishing an Introduction to Connections guide on the DCA’s member portal.

To try and deal with power supply constraints, it said it could offer a range of connections beyond non-curtailable or unconstrained connections, including ramped connections, with flexible capacity that increases over time; flexible connections managed in real time; and profiled connections, in which customizable capacity profiles are created to match operational patterns.

Energy regulator Ofgem, meanwhile, has complained that many applications are speculative in nature, and is proposing that data center projects should have to pay between £237,500 and £712,500 per megawatt when they accept a connection offer.

Microsoft is currently the only customer to have signed up for the Loughton data center, and its decision to pull out could have an effect on Nscale’s planned flotation in the US later this year, where it is targeting a valuation of $35 billion.

But the move is not only a problem for Nscale, but a potential embarrassment for the UK government. Last year, as part of its AI Opportunities Action Plan, it trumpeted plans from Nscale to invest $2.5 billion to support the UK’s data center infrastructure over three years. These plans included the building of the Essex data center, described as the UK’s largest sovereign AI data facility.

In a statement, Nscale told ITPro: “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. Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts.”

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