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UK Data Centre Spending to Hit £10 Billion Annually by 2029 Amid AI Boom

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Spending on new UK data centres is set to surge to £10 billion a year by 2029, more than five times higher than in 2024, according to new analysis from construction data firm Barbour ABI.

The report found that £1.75 billion was spent on data centre construction in 2023, with that figure projected to rise to £2.38 billion in 2025 as demand for AI-driven computing power continues to accelerate. Over the next five years, tech giants including Microsoft, Nvidia, and Google are expected to invest a combined £25 billion in the UK’s data infrastructure, with nearly 100 new projects already in the pipeline.

Barbour ABI said the expansion reflects both global AI adoption and UK government initiatives, such as the AI Growth Zones, designed to speed up planning approvals for digital infrastructure.

While London and its surrounding regions remain the country’s data centre hub, development is now spreading nationwide, driven by rising demand for low-latency connectivity and renewable energy sources to power data-intensive AI systems.

The largest upcoming project is a $13 billion hyperscale data centre planned in North East England, led by U.S. private equity group Blackstone—a sign that international investors view the UK as a strategic AI infrastructure hub.

The rise in data centre construction comes amid a global race to expand digital capacity following the release of ChatGPT in late 2022, which sparked an explosion in AI model training, cloud computing, and enterprise automation.

Barbour ABI said the shift marks one of the fastest-growing infrastructure trends in the country’s history. “AI has completely reshaped data demands,” the report noted. “We’re now entering a decade defined by hyperscale expansion.”

European Data Centre Space Shortage Expected in 2025 as AI Booms

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As artificial intelligence (AI) continues to surge, Europe’s data centres are facing a growing capacity crisis. Despite plans to expand by 22% in 2025, experts warn that demand will outpace supply, risking Europe’s further delay in the AI race. Analysts at the Kickstart Europe conference on Wednesday highlighted the growing concerns about electric grid congestion and a lack of suitable sites for new data centres, particularly in traditional European hubs like Frankfurt, London, Amsterdam, Paris, and Dublin.

One of the key developments exacerbating this issue is the rise of China’s DeepSeek, which has introduced more energy-efficient AI models. While this development may ease some of the pressure, it does not address Europe’s significant infrastructure constraints.

Major software companies like Google and Amazon are continuing to push ahead with plans for hyperscale data centres, but they, along with European firms, are struggling to find adequate space. “Providers can’t build supply fast enough to keep up with demand,” said Kevin Restivo, director of data centre research at CBRE, during his keynote address.

The shortage is most pronounced in primary data centre locations, but secondary markets like Milan, Warsaw, and Berlin are seeing rapid growth in 2025. Many companies are even looking outside of urban areas to find space. CBRE forecasts that 9.1 gigawatts of new capacity will come online this year, with hyperscalers taking up over a third of it.

However, Europe’s data centre expansion still lags behind U.S. investments, which are seeing massive funding, such as the $500 billion “Stargate” initiative involving Oracle, Microsoft, and OpenAI over the next four years. According to CBRE, the average cost to build data centre space in Europe is 12 million euros per megawatt, suggesting that the European market is expanding by over 100 billion euros this year. Despite this growth, analysts, such as Stijn Grove from the Dutch Data Center Association, warn that Europe risks falling behind in the AI race, becoming technologically dependent on the U.S. and China.