Microsoft Quits Nscale's Essex Data Centre Weeks Before Its Wall Street Debut

Microsoft Quits Nscale's Essex Data Centre Weeks Before Its Wall Street Debut

Microsoft ends the Loughton agreement

Microsoft has terminated its agreement with British cloud provider Nscale for a data centre in Loughton, Essex, the Telegraph reported on Sunday. The US company was one of Nscale's two largest customers and had been expected to take the anchor tenancy at the site. The newspaper did not say why Microsoft withdrew, and Microsoft did not immediately respond to Reuters requests for comment outside regular business hours. The decision leaves Nscale without any publicly announced customer for a campus that British ministers once called the country's largest sovereign AI data centre.

Nscale says the project continues

A Nscale spokesperson told Reuters the company remains committed to both the Loughton project and the UK, and is exploring alternative power sources for the site alongside other expansion locations in Britain. The spokesperson added that its relationship with Microsoft remains strong and long-term and that the London-wide grid problem has no impact on its other contracts. According to the Guardian, Microsoft is understood to remain on board for a separate Nscale project in Norway.

The chips were booked, the power was not

Microsoft had agreed to lease about 23,000 Nvidia AI chips at the site, the Telegraph reported. Nscale's own announcement in September 2025 was more precise: an initial 23,040 Nvidia GB300 processors due for delivery in the first quarter of 2027, providing Microsoft Azure services across the UK, with 50 megawatts of AI capacity at first and room to scale to 90 megawatts. Electricity is where the plan broke. UK Power Networks has told Nscale that the local grid is not expected to supply enough power until the early to mid-2030s, according to the Guardian, which first reported the delay in late September. The 90MW the site is seeking is roughly what 315,000 homes consume, and the launch date had already slipped to 2027.

A pledge made during Trump's state visit

The Telegraph reported that Microsoft's backing for Loughton formed part of GBP 22bn in UK investments the company promised last year, during Donald Trump's state visit, when then prime minister Keir Starmer described the money as a step towards Britain becoming a world leader in AI. The government highlighted Loughton when it set out its AI strategy in 2025, calling it the largest UK sovereign AI data centre. Nscale had pledged GBP 2bn to the UK data centre industry in January 2025 and said the facility would create about 250 permanent jobs. There was doubt earlier this year as well: the Guardian reported in March that the location was still operating as a scaffolding yard.

Losing the anchor tenant before listing

The timing is awkward. Nscale filed for a US initial public offering on 18 September, seeking to list on the New York Stock Exchange under the ticker NSCL, aiming to raise as much as USD 3bn at a valuation of up to USD 35bn, roughly GBP 26bn. Its filings show Microsoft and Anthropic together account for about 85 per cent of its contracts, on a signed contract value of USD 103.4bn, of which about USD 43.8bn is Microsoft business running to 2033 and roughly USD 45bn is Anthropic compute. Microsoft accounted for about 73 per cent of Nscale's 2025 revenue. The company reported USD 140.6m of revenue in the first half of 2026, up 1,252 per cent year on year, against a USD 1.02bn net loss.

Norway's flagship is already behind

Loughton is not the only site under pressure. Nscale's flagship Glomfjord facility in Norway is running about six months late, with only 6.4MW of a planned 30MW in service after cooling pipe leaks, local regulatory hurdles and a transformer fire last December, Bloomberg reported. A Norwegian safety agency identified 10 violations before closing the case in September.

Britain's grid queue is the real bottleneck

The problem is bigger than one developer. Ofgem said in June that 315 data centres were queuing for grid connections, together seeking 73GW, against a national peak electricity demand of 45GW. In July the regulator proposed upfront connection fees of GBP 237,500 to GBP 712,500 per megawatt to clear speculative applications.

Two open questions: alternative power and IPO pricing

Two things matter from here: whether Nscale can rescue Loughton with on-site generation or power bought elsewhere, and how the loss of an anchor customer feeds into its IPO pricing. Investors are being asked to fund a backlog of contracted revenue whose first megawatts have not yet been connected to the grid.