UK Data Centre Spending Set to Skyrocket Past £10 Billion Annually by 2029

Spending on new data centres in the UK is projected to surge dramatically, exceeding £10 billion per year by 2029. This represents a more than fourfold increase from the current annual total of £1.75 billion, according to new analysis from construction data firm Barbour ABI. This significant growth is primarily fuelled by the escalating demand for artificial intelligence and Internet of Things infrastructure, with nearly 100 new facilities currently in various stages of the planning process.

Key Takeaways

UK data centre spending is forecast to surpass £10 billion annually by 2029.
This growth is driven by AI and IoT demand, with numerous new facilities planned.
Investment is expanding beyond London and the South East to regions with lower costs and cooler climates.
Challenges such as rising energy costs, planning hurdles, and labour shortages could impact expansion.
Environmental impact and transparency in energy usage are growing concerns for the sector.

Market Growth and Shifting Investment

By 2029, the data centre market is expected to rival the education and industrial construction sectors, which are predicted to reach £10.5 billion and £10.7 billion respectively. While new office construction is forecast to be worth £18.4 billion, infrastructure (£48.2 billion) and residential (£70.4 billion) are expected to remain larger markets.

Traditionally dominated by London and the South East, new data centre projects are increasingly being planned in the North, East of England, and Wales. These regions offer advantages such as cheaper land and cooler ambient temperatures, making them more attractive for large-scale developments. Government initiatives, including AI Growth Zones and regional development policies, are also playing a crucial role in attracting investment to non-metropolitan areas, with Barbour ABI anticipating over £25 billion in inward investment over the next five years.

Challenges and Environmental Considerations

Ed Griffiths, head of business and client analytics at Barbour ABI, highlighted that operators are investing in hyperscale facilities outside urban centres to manage immense computing workloads. However, he cautioned that rising energy costs, planning complexities, and labour shortages could impede this rapid expansion. Furthermore, concerns are mounting regarding transparency and the environmental footprint of these energy-intensive facilities.

“Data centres are now recognised as critical national infrastructure,” Griffiths stated. “But given the immense power they consume, operators will come under growing pressure to adopt greener practices. There is currently no requirement to report energy usage publicly, so it will be difficult to hold firms to account.”

The report stresses that while many companies are committing to renewable energy sources and energy-efficient technologies, sustainability must become an integral part of long-term strategic planning to mitigate potential environmental consequences. Recent significant investments, such as plans by Microsoft and Blackrock to invest billions in UK data centre infrastructure, underscore the sector’s rapid growth trajectory.