Chancellor John Healey used Wednesday's Budget to announce an AI package worth over £700m and a new Data Centre Covenant, built on the government's estimate that the UK will need 6 GW of AI data centre capacity by 2030. Developers that pass five tests, covering energy costs, local investment, efficiency, British suppliers including hardware, and security, will be classed as strategic and given faster access to the electricity grid.
The Covenant targets a severe power bottleneck. As we described in The $50 million megawatt, queued data centre projects exceed the UK's entire peak electricity demand, trapping serious schemes behind speculative ones. Earlier this month, Microsoft pulled out of Nscale's Essex site, which we covered in The central bank of Jensen, after being told the power might not arrive until the 2030s.
Strategic sites get three kinds of help:
- Ministers can reserve future grid capacity and reallocate capacity freed when projects leave the queue.
- The most important projects can use temporary on-site power while they wait for the grid.
- Ofgem's proposed commitment fees, which the Covenant backs, should clear speculative applications from the queue.
Source: Savills, UK data centre building capacity, H1 2026.
The AI package splits in two:
- Nearly £500m goes to security, covering biosecurity, the AI Security Institute, cyber defence, and a new unit for rogue AI agent incidents.
- Close to £290m goes to adoption and sovereignty, covering Sovereign AI equity and R&D contracts, an AI Pathfinder Fund, chip design skills, and local partnerships.
Source: HM Treasury, Budget 2026. Excludes a separate £50m Civil Service AI fund paid for from administrative savings.
In our November 2024 Budget analysis, we argued the UK would be constrained by compute rather than labour. Progress since the AI Opportunities Action Plan has been slow, but this Budget is the clearest sign yet that the government accepts the point. As Healey told Parliament, "nowhere is the necessary role for the state clearer than in Artificial Intelligence".
Live, under-construction, and committed sites together reach just over 4 GW. Hitting 6 GW by 2030 requires connecting capacity at about four times the UK's record rate of 231 MW, set in 2025.
Allowing temporary on-site power is the biggest shift. In the US, gas turbines brought xAI's Memphis cluster online in about four months, though neighbours sued over noise and pollution. In Britain, temporary power needs strict limits and guaranteed grid switch-over dates. The government also still hasn't defined what counts as strategic. Elsewhere, support for smaller businesses remains tiny, and major public sector AI funding looks set to wait for next year's Spending Review.
Takeaways: Britain ranks fourth globally for installed capacity. The US is building many times the UK's target, while several Asian countries have bigger pipelines. We accept local infrastructure for energy, defence, and food security; machine intelligence security now belongs on that list.