Tech giants hit by clampdown on data centres
Tech giants hit by clampdown on data centres
Matthew FieldThu, October 29, 2026 at 8:00 AM UTC
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Big tech companies such as Google are building data centres across the UK - Richard Newstead
Tech giants will be hit with a crackdown on new data centres amid a growing backlash against the global expansion in AI data centre construction.
The Treasury has confirmed plans for a data centre “covenant” – a deal with technology businesses that forces developers to abide by new rules in exchange for faster access to grid power.
AI companies will need to agree that their data centres will not push up energy bills; must pledge to invest in local communities; and report on their water use.
They will also be encouraged to reuse wasted heat from their facilities to power local homes and use British AI hardware.
In return, companies will get quicker planning and power approvals amid a backlog that has seen some companies told they must wait up to 15 years for a grid link.
Data centres are facing mounting resistance from communities globally, with some cities in the US and Europe introducing moratoriums on new development.
Confirming the plans in his first Budget, John Healey said: “Here’s the deal. I am today launching a new British data centre covenant with strict tests that data centres must meet.
“In return, critical data centres will get the grid connections they need.”
Officials are targeting tripling Britain’s AI data centre capacity to six gigawatts by 2030 to stay in the race.
Under Sir Keir Starmer’s government, Labour promised to boost development by labelling data facilities critical national infrastructure to capitalise on the AI boom.
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But planning hurdles and high energy prices have held up key projects. Earlier this year OpenAI abandoned plans to build a major data centre in the UK because of the cost of power.
The Telegraph also revealed in July that Nscale, a British AI company, was facing major delays in securing a grid connection at its flagship UK site in Essex. Microsoft subsequently withdrew its backing for the project.
The new “covenant” promises to speed up access to power. It will also allow AI companies to build temporary power systems, normally gas-powered turbines, for “exceptionally strategic projects”.
Yet industry experts warned it was unclear whether the trade-off would help accelerate projects.
A source close to several technology giants said the grid proposals would be a “welcome package”, but the new rules risked “increasing the burden” of red tape.
Will Stone, a former Treasury adviser and a researcher at Science Works, said on X: “These things may all be nice, but they are not cheap. This could very well backfire badly.”
Walter Kulvik, a partner at the law firm Simmons & Simmons, said: “It is unclear whether the Government’s proposal will make much of a difference for the bigger sites and developers.”
However, Matthew Evans, of TechUK, said: “The data centre covenant is the Government’s recognition that domestic data centre capacity is essential to UK growth.”
Separately in the Budget, Mr Healey promised to invest hundreds of millions of pounds in AI start-ups and security programmes.
This will include £120m for the Government’s AI Security Institute, its AI testing lab, £165m for a biosecurity lab, and £40m to investigate “rogue” AI incidents. A further £140m will be handed to the Sovereign AI Unit to back promising companies.
Source: “AOL Money”
