Microsoft is exiting Nscale's data center project in Loughton, Essex, leaving the anchor-tenant slot empty. The Telegraph reported on October 18, 2026 that Microsoft recently informed Nscale it was terminating the agreement announced last year, and Bloomberg followed with the same story the same day. Under the original plan, Microsoft would rent 23,000 Nvidia AI chips at the site, Loughton was to be Nscale's first British data center, and it was slated to open in 2027.
What stalled the project is not chips, but the grid queue
The immediate background to the termination is power. UK Power Networks has notified the Loughton project that sufficient grid power will not be available until the early to mid-2030s, more than six years after the planned opening. In its response, Nscale called the problem a London-wide grid issue, said it has no impact on its other contracts, and said its relationship with Microsoft remains strong and long-term; Microsoft did not comment. High electricity prices and long waits for grid connections have long been seen as a major barrier to building AI infrastructure in Britain: in April, OpenAI suspended plans for a Stargate facility with Nscale on Tyneside, citing Britain's high electricity prices. In the compute business, the power bet behind AI data centers has changed the game before; this time, a grid queue has decided whether a project lives or dies.
The exit hurts more than one site
Microsoft is one of Nscale's two largest customers, and its backing was the hardest credibility signal the Loughton project had. It also formed part of the GBP 22 billion in UK investment Microsoft pledged last year during Donald Trump's state visit, and ministers had talked up the project as emblematic of Britain's AI ambitions. With the showcase losing its anchor tenant first, the biggest casualty is not this one campus but Nscale's listing plans: the company is pushing toward a Wall Street flotation worth up to USD 35 billion (about GBP 26 billion), just after a week in which AI computing stocks were sold off and investors grew pickier about debt-hungry data center businesses. Founded two years ago by Australian entrepreneur Josh Payne, Nscale has faced scrutiny for signing large contracts despite a lack of track record in building data centers; only days earlier, Nvidia chief executive Jensen Huang praised it at a London event as potentially the most valuable UK startup created in the last ten years. Praise and a cancelled anchor deal landing in the same week show how much faster the valuation story moves than the grid.
What matters next is not whether Microsoft returns, but whether Nscale can find alternative power and a replacement tenant for Loughton, and whether its listing timetable slips. For the wider industry the lesson is more direct: the bottleneck for AI data centers has shifted from not being able to buy chips to not being able to get power connected in time. Only campuses with power that can actually be delivered on schedule make a contract worth counting.
