Bloomberg, citing the Telegraph, reports Microsoft has pulled out of a UK data center deal with neocloud Nscale ahead of its planned IPO
Microsoft has pulled out of a UK data center deal with British neocloud Nscale at a critical time for the startup’s initial public offering hopes, the Telegraph reported.
Context
Losing its anchor tenant for a flagship UK site could hurt Nscale's IPO and adds to doubts about the UK's AI data center ambitions as power shortages delay projects.
This is secondhand: Bloomberg is relaying a Telegraph report, and Microsoft did not comment to either outlet. The Guardian and the Financial Times also reported the withdrawal, linking it to power supply delays at the Essex site.
- Bloomberg: Microsoft scraps UK data center deal with Nscale, Telegraph says
- The Telegraph: Microsoft axes AI deal in setback for UK data centre pioneer
- The Guardian: Microsoft pulls out of AI datacentre project in Essex over power supply concerns
- Financial Times: Microsoft pulls plug on Nscale data centre deal
Deep dive
On October 18, Bloomberg posted that Microsoft has pulled out of a UK data center deal with British neocloud Nscale at a critical time for the startup's IPO hopes, citing the Telegraph.
According to Bloomberg's report, the Telegraph did not give a specific reason, but said the site in Loughton, Essex has faced a series of delays and that authorities told Nscale they do not expect a power supply until the 2030s. It also reported that Nscale's flagship site in Norway is six months behind schedule, with 6.4 megawatts of a planned 30 megawatts running. Microsoft had been set to be the anchor tenant at the Essex site, and Nscale relies on Microsoft and Anthropic for about 85% of its contracts, according to its IPO filing. Bloomberg said Nscale is seeking to raise as much as $3 billion in its IPO.
An Nscale spokesperson told the Telegraph the company remains committed to the Loughton project and the UK, is exploring alternative power sources, and that its relationship with Microsoft remains strong and long term, with the grid issue having no impact on its other contracts.
The Guardian reported that ministers had heralded the project as the UK's largest AI data center when it was announced in 2025, and that it was planned to open next year. The FT reported Microsoft cancelled its agreement after it emerged the site was unlikely to have power until after 2030.
What to expect next
Watch whether Nscale changes the size or timing of its IPO, and whether it finds a new tenant or alternative power for the Essex site as its spokesperson suggested.
Also watch for comment from Microsoft and the UK government, which promoted the project, and whether other UK data center plans face similar grid delays. Investors will also look at Nscale's reliance on Microsoft and Anthropic as debt costs rise for neoclouds.