Microsoft ends data-centre deal with Nscale after UK grid delays, report says

Microsoft has terminated its agreement to anchor an artificial-intelligence data centre that Nscale, a London-based cloud computing startup, planned to build in Loughton, Essex, according to a report published Sunday by The Telegraph and circulated by Reuters and the Associated Press. The decision strikes at a project that had been billed, at its 2025 launch, as the United Kingdom's largest AI supercomputer, and it lands weeks before Nscale hopes to price a multibillion-dollar initial public offering on the New York Stock Exchange.

Neither Microsoft nor Nscale has offered a public account of why the agreement ended. Microsoft did not respond to Reuters' requests for comment on the report. Nscale, in a statement carried by the wire services, said its relationship with Microsoft "remains strong and long-term" and that the company remains committed to building out the Loughton site and its wider UK operations, including by seeking power sources outside the national grid.

A project built for scale, stalled by electricity

The Loughton campus was unveiled in September 2025 alongside the UK-US Technology Partnership, when Nscale, Microsoft, Nvidia and OpenAI jointly pledged tens of thousands of GPUs for British AI infrastructure. In its original announcement, Nscale said the Essex site would start at 50 megawatts of capacity, scalable to 90 megawatts, housing more than 23,000 Nvidia GB300 GPUs delivered in the first quarter of 2027 and dedicated to Microsoft's Azure cloud. Microsoft chief executive Satya Nadella called it "the UK's largest supercomputer, powered by over 23,000 GPUs," and then-prime minister Sir Keir Starmer said he wanted Britain to be "the destination of choice for companies at the forefront of technological change."

That timetable has since slipped badly, for reasons that have nothing to do with chips or capital. Trade reporting this year, including an account from The Next Web, described how the National Grid told Nscale it could not guarantee a power connection to the 90-megawatt site in time for the planned opening. Later reporting attributed to UK Power Networks pushed the likely connection date into the early-to-mid 2030s — roughly five to eight years later than the project's original target, and long after Microsoft had expected to be running Azure workloads from the site.

• 90 megawatts: the grid capacity Nscale sought for the Loughton site, equivalent to the draw of roughly 315,000 homes
• 23,040: the number of Nvidia GB300 GPUs originally planned for the campus's first phase
• $103 billion: Nscale's total contracted order backlog as of its IPO filing, with Microsoft and Anthropic accounting for about 85% of it
• $1.02 billion: Nscale's net loss for the six months to June 30, 2026, on revenue of $140.6 million

Why the grid, not the technology, became the bottleneck

Nscale's predicament is a symptom of a wider British problem. Demand for grid connections from data centres and other large energy users has surged faster than the transmission network can absorb, and British regulators have spent much of 2026 trying to contain it. The energy regulator Ofgem has moved to free up grid capacity by screening out speculative projects that reserve connection slots without being ready to build, part of a "Curate, Plan, Connect" programme developed with the National Energy System Operator and the energy department. Officials say applications for demand connections more than tripled in roughly a year, with data centres responsible for a large share of the increase, leaving genuine projects like Loughton stuck behind a queue of reservations that may never be built.

Industry analysts had flagged the risk months before Microsoft's reported exit. Taco Engelaar, of the grid-analytics firm Neara, told The Next Web in July:

"Britain's dreams of data centre sovereignty will disappear if we don't get a grip on the grid."

Nscale had already begun hedging against the delay, reportedly in talks with the US fuel-cell maker Bloom Energy about generating power on-site with gas-fuelled solid oxide cells rather than waiting for a grid connection it could not control. A company spokesperson said as recently as July that Nscale remained "fully committed to the Loughton project," a position it repeated over the weekend even as its most important customer reportedly walked away.

A costly loss for a company about to go public

The timing is awkward for Nscale beyond the Essex site itself. The company filed a registration statement with the US Securities and Exchange Commission in September for a proposed listing on the New York Stock Exchange under the ticker "NSCL," with Goldman Sachs, J.P. Morgan and Morgan Stanley as lead underwriters. Press coverage of the filing put the targeted valuation at roughly $30 billion to $35 billion, with plans to raise up to $3 billion.

That prospectus, filed with the SEC on September 18, shows how concentrated Nscale's business already is: Microsoft and Anthropic together account for roughly 85% of a contracted order book reported at more than $103 billion, with Microsoft's compute commitments alone said to run to 2033. Revenue for the first half of 2026 reached $140.6 million, up from $10.4 million a year earlier, but net losses widened sharply to $1.02 billion from $369 million over the same period, underscoring how far the young company still is from profitability even as its contracted backlog has ballooned. Losing Microsoft as the anchor tenant for one of its flagship UK sites, even if the broader commercial relationship survives, is the kind of disclosure that underwriters and prospective shareholders will be parsing closely in the weeks before any roadshow.

The setback also complicates the UK government's own data-centre ambitions. Loughton had been promoted as a flagship of Britain's push to brand itself a hub for "sovereign" AI computing, backed by planning approval from Epping Forest District Council over the objections of some local councillors who warned the site's power demands had grown since it was first proposed. A government that designated data centres as critical national infrastructure now has one of its marquee projects publicly tied to a grid connection that may not materialise this decade.

What comes next

Nscale says it is still pursuing alternative power arrangements for Loughton and other UK expansion, and insists its underlying relationship with Microsoft continues elsewhere, including sites in Norway, Portugal and the United States where Microsoft remains a customer. Whether Microsoft redirects the Azure capacity it had earmarked for Essex to another UK or European site, or scales back its near-term UK ambitions altogether, has not been disclosed by either company.

For now, the episode is being read across the data-centre industry as a warning that grid access, not chip supply or capital, has become the binding constraint on Britain's AI buildout — and a reminder, days before Nscale is expected to begin marketing its IPO, that even blue-chip customer relationships are not immune to the physical limits of the power grid.