The topics of this article were originally discussed during our ‘Risk, resilience and growth in the data centre landscape’ seminar and panel discussion, on 15 October 2025.
Data centres are integral to supporting continued developments in cloud computing, artificial intelligence (AI), and machine learning. However, despite rapid expansion and their increasing importance to both the UK and the global economy, data centres still face multiple risks that could inhibit future growth.
To facilitate sustainable growth in this industry, it is imperative developers mitigate evolving threats by building resilience into their developments.
The significant pace of data centre growth
The UK's data centre ecosystem is experiencing a tremendous boom, with revenues forecast to hit $18.2 billion by 2026, an increase of $6.25 billion (opens a new window), since 2017. Looking forward, the number of data centres is expected to grow by around 20% (opens a new window) in the next five years, and the Government’s decision to designate them as critical national infrastructure (opens a new window) underlines their importance to the UK's economic future.
However, this rate of growth raises important sustainability concerns, and McKinsey research projects that globally, by 2030, data centres will require almost $7 trillion (opens a new window) of investment to keep pace with the demand for compute power. This exponential growth represents a huge opportunity for the UK economy. The question is, are we doing everything that we can to take advantage of this opportunity?
Energy and power considerations
Reliable energy supply and grid connectivity are of critical importance, particularly for hyperscale data centres. However, UK businesses are burdened by having to pay around 50% more (opens a new window) for electricity than German and French companies, and over three times (opens a new window) more than their US counterparts. In the exceptionally competitive data centres sector, energy costs can seriously affect the viability of UK enterprises.
In late 2024, Ofgem released its RIIO-T3 Business Plan (opens a new window), which sets out the National Grid’s strategy for 2026 to 2031. However, the outlined investment in grid capabilities and development – a plan that is unlikely to be deviated from – may be insufficient for the lofty targets of the data centre industry and their hyperscale customers.
Small modular nuclear reactors (SMRs) are viewed by some market participants as a panacea for energy challenges. However, in the UK, SMRs will be accompanied by very onerous regulation and, currently, can only be erected at sites with existing nuclear capabilities – limiting their applicability and placing further strain on already stretched grid infrastructure.
Navigating planning permission and regulation
Numerous regulatory factors affect data centre development, rights of light (opens a new window) being one such example of this. Businesses may find government regulation impedes data centre development and, in the global AI arms race, governments that adopt a strategic approach that successfully blends aspects of the public and private sectors can make big gains. The UK Government could form schemes, such as plans to create ‘AI Growth Zones’ (opens a new window), to attract and incentivise data centre construction.
The existing UK planning permission framework can cause construction delays, and some local authorities make decisions on data centres without sufficient technical expertise. Simplified Planning Zones (SPZ), such as those already established in Slough (opens a new window), could be a solution replicated across the country to expedite and derisk planning blockages.
Risk mitigation and transfer options
While the identified headwinds can be difficult to predict, control, or mitigate, there are options for developers looking to build resilience into their data centre project. Some of these include:
Engaging with local communities and authorities
Developers should educate and engage with local residents – who may be concerned that data centres could overwhelm energy infrastructure or drive up their utility bills. For meaningful dialogue, engagement with each community should be tailored and relevant to their area. Improving the perception of data centres can contribute to the overall health of the wider industry, too.Securing financing for your project
Data centre financiers will want to have confidence they are funding projects that will be continuously viable and valuable for future years. Leases are typically issued for between 15 to 20 years, and developers will need to demonstrate a projected, consistent flow of income for this period. Developers are unlikely to gain funding without evidence of secure energy sources and planning permission, unless a strong alternative use for the site is also proposed. Typical winners in this space are flexible to adopt any energy solution, including SMRs, gas, solar, BESS, or a combination of these.Ensuring your development retains value
When selecting a data centre location (opens a new window), it is prudent you consider scalability, flexibility, modified deployment, and future expansion potential. For example, the rapid developments in technology and client requirements have increased the density of data centre designs – which can be harder to retrofit at a later date. Building in flexibility from inception will help futureproof sites and also create the possibility to scale a site as demand grows – eliminating disruption, costly overhauls, or relocations.Building a robust data centre ecosystem
Tier-2 cities are becoming (opens a new window) more attractive as developers look to capitalise on lower land costs and build a more distributed data centre network. A well-defined strategy of interconnected assets, across both core and edge locations, can attract clients without sacrificing service standards.
For more information and assistance on your data centre project, reach out to a member of our Data Centre Practice. For further insights, visit our Data Centres (opens a new window) page.
