UK Growth Zones - Securing the Future of the UK Data Centre Market?

AI Growth Zones are a lodestone of The UK’s industrial strategy.

Designed to accelerate inward investments across all regions to date there is a focus on the de-industrialized north of England, Scotland and Wales with a push to attract developer investor interest.  

This is evidenced by the number and location of areas that have gone public on their expressions of interest - see below. 

November 2025 saw the UK Government Department of Science Innovation and Technology (DSIT) publish its Delivering AI Growth Zones paper.

The paper is the latest promotion of a strategy to “position the UK as a global leader in AI innovation and adoption, ensuring that the benefits of this transformative technology are felt across every region and sector.”

What this means in practice is enticing investors, developers, regional and local government’s to partner in developing AI data centre infrastructure on which the Government is hanging a major part of its industrial strategy through its ambition to drive billions of pounds of inward investment, thousands of local jobs and building digital hubs to create long term employment in the energy infrastructure and digital economies.   

For those areas applying to develop AI growth zones and which meet the criteria for technical feasibility such as power access, water access, local impact, planning and a delivery strategy the rewards of gaining AI Growth Zone status could be substantial.

In November it was announced that North Wales would be an AI growth zone. 

The Government said: “A total of 3,450 jobs are now poised to come online in North Wales as a direct result of this new AI Growth Zone, covering temporary and construction roles through to high-paid careers in AI research and development.”

“The AI Growth Zone site straddles the Menai Strait, with a base at Prosperity Parc on Anglesey and another at Trawsfynydd in the heart of Gwynedd. Work is already underway to secure an investment partner to help deliver the AI Growth Zone site, and construction work will then swing into action once a deal has been confirmed, expected in the coming months.”

An investor sweetener for North Wales was the announcement of the construction of a three Small Modular Reactors in Wyfla, Anglesey. 

This was followed by the announcement of a second Welsh zone in South Wales between Newport and Bridgend. 

An earlier AI growth Zone had been confirmed across two sites in the North East of England, in Blyth, Northumbria and Cobalt Park near Newcastle.

This followed the AI Growth Zone pilot project in Culham Oxfordshire that could see the private/public financing of what may become a 100MW data centre. 

Today and tomorrow

As covered previously we have reached the latest step in a plan that began in January 2025.

At the end of the initial consultation period for growth zones in April 2025 the Government report over 200 expressions of interest in Growth Zone applications from regions and local authorities. However just a handful have gone public with their interest. 

These include: Dumfries and Galloway Council  which formally submitted an expression of interest to host an AI Growth Zone. York and North Yorkshire (via its Combined Authority) — which submitted a bid to become an AI Growth Zone, centred around a proposed data centre at Drax Power Station. Doncaster / South Yorkshire Mayoral Combined Authority (SYMCA) — launched a campaign to become an AI Growth Zone as did Lancaster District Council. Northern Lincolnshire issued a proposal for a zone capable of multi-gigawatt capacity and a major data centre cluster. 

With Wales on the AI Growth Zone map, it is understood other areas are preparing applications for AI Growth Zone status. 

Views from the industry - barriers to overcome 

The Government hopes its plans for ease of access to power will unblock the biggest barriers to data centre development. These are planning time, power availability, and cost of energy. 

However, a look across the UK shows a mixed bag of potential with recurring issues coming to the fore. 

In November, the Yorkshire Evening Post reported that Microsoft’s Clare Barclay, president of enterprise and industry for Europe, said the company is facing lengthy delays to secure power for its Leeds ‘hyperscale data centre’.

Having invested over £100m in a former power station near the city Ms Barclay told the CBI annual conference: “There are some things that we would welcome on planning: access to energy infrastructure, data centres. All that kind of stuff is really important. The planning process is painful.”

It should be noted that the Government’s Infrastructure Planning Bill is expected to receive Royal Ascent and become law in December 2025.

Vijay Mistry, Partner and Founder at Vipa Digital, said: “The new UK Infrastructure Planning Bill is a meaningful step forward for the data centre sector. Recognising large data centres as National Significant Infrastructure Projects is a big step. It puts digital infrastructure on the same level as energy and transport projects and should help cut through years of planning delays. It’s a positive move for investment, but planning has never been the only bottleneck. Land constraints, Power, workforce capacity, and supply-chain pressure remain big barriers.”

Commenting at the time of the AI Delivery paper being issued Spencer Lamb, Kao Data MD & CCO responded to the proposed movement on power pricing.

Commenting on plans to reduced power costs to data centres which opt to harness grid constrained power from unused renewable energy generated in Scotland he said in a post: “If implemented from April 2027, a 500MW data centre in an AI Growth Zone could see annual electricity costs fall. It's progress, but we are still far from competitive. A 500MW annual bill currently sits at around £900M in the UK. Even with these reductions that only brings the price down to circa £780-£800M. That compares with £700M in France, £438M in Spain, £219M in the United States and £215M in the Nordics, before their governments introduce further incentives.” (See box out 1)

Mr Mistry points out that the UK has fantastic fundamentals such as fibre density, subsea connectivity, and strong enterprise demand, but says turning that into real projects is still harder than it should be. 

“Power remains the single biggest blocker. Parts of London are effectively grid-locked to 2035, and that’s the constraint that will define the UK’s competitiveness. These constraints are also sparking innovation, from on-site generation and dedicated renewables to battery storage and even SMRs. That could reshape the UK data centre market in the next decade.”

On the topic of zones he says: “For AI growth zones to succeed planning must become faster for large sites. To build real confidence they must remove the biggest constraint: power availability. Otherwise grid scarcity will continue to limit deployment speed and scale. If the UK can pair faster planning with credible power solutions, it has the potential to unlock a new wave of digital infrastructure investment.”

Conclusion

In data centre terms the UK sector is awash with announcements on new planning and construction projects – one report said over 200 data centre planning applications were submitted in 2025.

We have entered the second stages of Government attempts to use AI Growth Zones to grease the wheels of data centre development. 

Within that context if confidence can be measured in potential project announcements, expressions of interest, large tech company pledges, commitments and partnerships then as we enter 2026 there is much to be positive about in the UK data centre sector. (See Box Two.)

It is safe to say the UK Government is going all in on AI by seeking investor buy-in to build a broad digital and energy ecosystem for the 21st century. Success will be measured in its ability to attract such interest at the scale required.