COMMENT Artificial intelligence is transforming industries at an unprecedented rate, from automating tasks such as fraud detection and forecasting in finance, to enhancing diagnostic accuracy and speeding up the analysis of medical data in healthcare.
The UK government is betting big on its future potential. But AI requires significant infrastructure. The sector’s rapid expansion relies on data centres which, in turn, depend on a secure, scalable energy supply. Right now, this is one of the biggest constraints.
In my conversations with investors, developers and data centre operators, the same questions come up again and again: where will the power come from, how soon can we have it, and will energy uncertainty limit our growth?
Power up
The UK has one of the largest data centre markets in Europe, but grid capacity constraints mean it can take several years to secure a grid connection. In some cases, developers are being told they need to wait for up to a decade. In response, some are looking beyond traditional data centre hubs at sites with stronger energy infrastructure while others are pursuing alternative ideas such as near-site generation to move forward.
Significant reforms are under way to address increasing demand on the electricity grid and encourage more clean energy generation. For example, prime minister Sir Keir Starmer has announced planning reforms to accelerate nuclear power development, particularly small modular reactors. Unlike traditional nuclear plants, SMRs require less land, are faster to deploy, and can be integrated into industrial and technology clusters. These are important steps forward, but planning reform alone isn’t enough. We need to see this translate into further investment in localised power solutions.
In 2024, we saw partnerships between National Grid and the Greater London Authority unlock and expedite network capacity in west London for housing, this approach to collaboration would benefit power availability to new data centre sites.
Beyond power, land availability is another critical factor shaping investment decisions. While sites with previous alternative uses in areas of Wales, Scotland and Northern England present opportunities for data centres, in many cases only a small percentage of the land can be built on and while this may be suitable for industrial and commercial clients, it does not align with the development requirements for many data centre operators meaning that many available sites fall short.
I’ve seen how proactive engagement between utility providers and co-location developers in Australia and New Zealand has helped streamline planning and site selection. The UK appears to be making progress but could take a similar approach – greater communication between government, industry, and energy providers – which could help unlock land that is truly investment-ready.
However, even when viable sites are identified, a workforce shortage threatens to slow down developments. The UK Industrial Strategy (nationally) and the London Growth Plan (regionally) pledge to create hundreds of thousands of new jobs but a significant skills gap remains. Data centre development and energy resilience require highly skilled engineers, planners and operators, and right now, efforts need to be made to create a capable and sustainable workforce pipeline.
If the UK is to remain globally competitive, it must align education, industry and policy to ensure that the next generation of professionals is trained to deliver AI-ready infrastructure.
Once in a generation
Energy access is a central concern for international investors. The traditional approach of solely relying on the national grid may need to be bolstered. That’s why we are increasingly seeing integrated real estate and energy planning, where developers are considering additional on-site power generation, battery storage and private network solutions from the outset.
This shift is already happening. In some regions, forward-thinking investors are securing land not just based on location, but also on proximity to power infrastructure – a trend that will shape the UK’s data centre investment landscape for years to come.
The AI revolution is a once-in-a-generation opportunity, but only if the infrastructure is there to support it. If the London Growth Plan provides real clarity on how energy security will be addressed, it can help give the private sector further confidence in backing data centre expansion.
This is not just a question of whether the UK can attract AI companies, it is about whether the real estate sector can position itself at the centre of global digital transformation. If the UK can move quickly to address energy and infrastructure challenges, it has a chance to cement itself as a global hub for AI-powered real estate investment.
Stephen Meleady is data centres sector lead at Stantec
