British AI infrastructure company Nscale has suffered a major setback after Microsoft withdrew from an agreement to become the anchor tenant at its planned data centre in Loughton, Essex.
The American technology giant reportedly raised concerns about construction delays and the availability of electricity at the proposed facility. The withdrawal threatens to complicate Nscale’s plans to list on the New York Stock Exchange at a targeted valuation of $35 billion (£26.25 billion).
Microsoft is one of Nscale’s two largest customers and accounts for approximately 40 per cent of the company’s contracted revenue. It had agreed to rent 23,000 high-end AI chips for the Essex site.
Power Supply Delays Threaten the Loughton Project
The Loughton facility was initially expected to become operational next year. However, electricity grid executives are now forecasting that the site may not receive a power supply until the 2030s.
The project has also experienced repeated construction delays. Photographs taken in March showed that the proposed location was still being used as a functioning scaffolding yard.
When the Labour government unveiled its AI strategy in 2025, Prime Minister Sir Keir Starmer presented the planned development as the largest UK sovereign AI data centre.
The facility was expected to provide infrastructure for advanced artificial intelligence systems, requiring substantial computing capacity and a reliable electricity supply.
Microsoft Deal Was Part of £22 Billion Investment Announcement
The Microsoft agreement was announced as part of £22 billion in investment commitments made during US President Donald Trump’s state visit to the UK last year.
The withdrawal therefore represents a setback for a project that had been presented as an important part of Britain’s ambitions to expand its domestic AI infrastructure.
Nscale has said it remains committed to the Loughton development and is exploring alternative sources of electricity, alongside other potential expansion sites in the UK.
A company spokesman told The Telegraph that its relationship with Microsoft remained strong and long-term, adding that the grid-related problem affecting the London area did not affect its other contracts.
Microsoft declined to comment.
Nick Clegg’s Potential £30 Million Windfall Faces Uncertainty
The setback has also cast uncertainty over the potential financial returns for former British deputy prime minister Nick Clegg, who joined Nscale’s board seven months ago.
Clegg owns 917,000 shares in the company, representing approximately 0.12 per cent of its equity. If Nscale achieves its targeted valuation of $35 billion in a New York listing, his holding could be worth as much as £30 million.
The former Liberal Democrat leader is also believed to receive an annual retainer of $60,000 (£45,000) and a share bonus worth $260,000 (£195,000).
Nscale welcomed Clegg to its board after he left his position at Meta, the parent company of Facebook. The company said at the time that he brought extensive international experience in technology, policy, operations and governance.
Sheryl Sandberg, Clegg’s former colleague at Meta, was also offered a board position around the same time.
Clegg’s Career Shift Into Technology
Clegg rose to national prominence during the 2010 general election, when his performances in televised leaders’ debates prompted the term “Cleggmania”.
His popularity subsequently declined after the Liberal Democrats entered a coalition government with the Conservatives. The party faced criticism over several policy reversals, including its decision to abandon a pledge to oppose increases in university tuition fees. Student protesters later burned an effigy of Clegg.
He lost his Sheffield Hallam parliamentary seat in 2017 before moving further into the technology industry.
During seven years at Meta, where he worked under chief executive Mark Zuckerberg, Clegg is estimated to have earned approximately £100 million. He was promoted to president of global affairs in 2022 and became closely associated with the company’s metaverse ambitions.
His investment in Nscale offered the prospect of another substantial financial return through the company’s planned stock market flotation.
Nscale Targets a Valuation More Than Double Its Private Worth
Nscale filed for a multibillion-dollar listing on the New York Stock Exchange in September, seeking a valuation of $35 billion. The company has previously been valued privately at approximately $15 billion.
The planned flotation would more than double that valuation if the target is achieved.
Nscale emerged from Arkon Energy, a Melbourne-based cryptocurrency mining business, before shifting its focus towards AI infrastructure. It describes itself as the engine of superintelligence.
The company operates data centres in Norway and Iceland, where facilities use hydroelectric or geothermal energy. It also has operations in Portugal and the United States and runs additional facilities with corporate partners.
Unlike its Nordic locations, the Loughton site does not have access to the same readily available hydroelectric or geothermal power options, making the electricity supply challenge a significant issue for the development.
Nvidia Backs Nscale as AI Investment Faces Market Pressure
Nscale has attracted substantial backing from Nvidia, the chipmaker whose revenues have surged amid growing demand for artificial intelligence computing infrastructure.
Nvidia’s market capitalisation has reached approximately $5.2 trillion (£3.9 trillion), making it the world’s most valuable company, according to the report.
Nvidia chief executive Jensen Huang praised Nscale at an event in London this week, saying: “You could be the most valuable UK startup they have created in the last ten years.”
However, the outlook for AI infrastructure businesses has faced growing scrutiny. Shares in rival data centre companies have fallen in recent days amid concerns about their ability to repay debt.
Nscale’s proposed flotation is consequently being watched as an indicator of investor appetite for AI companies and the infrastructure required to support them.
Company Says UK Expansion Plans Remain in Place
Despite the loss of the Microsoft agreement for the Loughton facility, Nscale has reiterated its commitment to the project and to expanding its presence in Britain.
The company said it was examining alternative power sources for the Essex development while considering additional UK expansion locations.
The success of its planned New York listing remains uncertain, with the loss of a major customer and continuing concerns about electricity availability adding pressure to a business seeking a valuation of $35 billion.
