New £1bn London data centre to back soaring AI demand as UK eyes 'digital future'

Segro and Pure Data Centres have revealed plans for a new £1bn data centre in London's Park Royal, designed to cater to the increasing demand for digital infrastructure within the UK.

Slated for completion in 2026, with operations commencing in 2029, the centre will support advanced AI and cloud computing services, aligning with the government's ambition to make the UK a pioneer in AI technology, as reported by City AM.

Endorsed by Secretary Peter Kyle, the initiative is seen as crucial for the UK to maintain a competitive edge in the digital and AI realms. Kyle has commented: "Private investment like this innovative partnership between Segro and Pure DC will help ensure the UK has the digital infrastructure it needs to thrive, paving the way for a digital and AI-powered future."

AJ Bell's Russ Mould remarked on the market's favourable response, stating that "Segro's data centre joint ventures gives investors a different spin on the AI theme", highlighting the company's success as it leads the FTSE risers list.

The venture promises substantial financial gains, with an anticipated yield of nine to ten per cent.

As Europe moves forward with its data centre construction drive to meet the growing requirements for high-performance computing, this facility at Park Royal comes as part of this broader trend.

With the UK government's AI action plan unveiled in January, AI sits at the core of Rachel Reeves' economic growth strategies. The approach towards AI regulation, as outlined in the white paper, adopts a 'pro-innovation' stance, promising to sidestep overly strict regulations to foster attractive investment opportunities.

This substantial investment, one of the largest in the UK, represents the private sector's response to these ambitions, amid increasing pressure to meet the surging demand for AI capabilities.

The demand for data centre capacity is experiencing rapid growth.

A recent report by Rider Levett Bucknall revealed that operators expect to deploy 27MW of capacity this year, marking a nearly 300% increase since 2023.

However, the UK faces additional obstacles due to supply chain challenges and sustainability concerns. Land and power shortages have already caused delays and restrictions in certain parts of the UK.

The AI sector is grappling with a significant shortage of computing power, and although projects like the Park Royal data centre will provide some relief, they are lagging behind the US and China, which have invested vast sums in AI-ready supercomputing hubs.

According to Stephen Beard, head of data centres at Knight Frank, there is a "disconnect" between the government's AI ambitions and the ability to "secure timely grid connections".

Grid capacity has fallen short in three of the past five years, with over £100bn invested in data centres annually.