UK-US Tech Partnership – a leap forward for UK infrastructure

On 18 September 2025 the United States and United Kingdom unveiled the “Tech Prosperity Deal”, a landmark agreement that promises to reshape the future of digital infrastructure in the UK. 

Billed with a focus on AI acceleration, the deal will also provide for investment in data centres and computing as well as civil nuclear projects. The hope is that the proposed billion-pound investment will create untold benefits for the UK population, stretching into the fields of medical advancements, clean energy and AI infrastructure. 

A central focus of the partnership is the recognition that data infrastructure will become even more essential in the future, and cannot be disentangled from the UK’s energy strategy. Renewable energy, and even nuclear, particularly small modular reactors (SMRs), will become essential to supporting the increasingly overwhelming demand for power.

The Pledges

At the heart of the deal is a record-breaking commitment from US tech giants to invest in the UK’s AI and data infrastructure. Microsoft leads the charge with a $30 billion (£22 billion) pledge over four years, the largest single investment it has ever made in the UK. This will fund the construction of the country’s largest supercomputer and a network of new data centres, including a flagship site in Essex developed in partnership with British firm Nscale and powered by Nvidia’s latest AI chips.

Google has also committed an additional $5 billion to UK AI research and infrastructure, including a new £1 billion data centre in Essex. Other major US players, OpenAI, CoreWeave, Salesforce, and Blackstone, are also investing heavily, with Blackstone pledging £90 billion over the next decade to develop data centre capacity.

Data centres and grid stability 

A centrepiece of the announcement is the creation of an “AI Growth Zone” in North East England, encompassing sites in Blyth and Cobalt Park near Newcastle. This initiative is expected to generate more than 5,000 new jobs and attract up to £30 billion in private investment, positioning the region as one of Europe’s largest data centre hubs. The Growth Zone will leverage the area’s access to low-carbon and renewable energy, world-class universities, and a burgeoning tech ecosystem.

However these investments will require new data centre campuses, extensive grid reinforcements, and a reliable 24/7 energy supply. As data centres require substantial and continuous energy to operate, they will place a significant strain on the already fragile grid infrastructure of the country. This heightened demand can lead to a greater risk of grid instability, and the country's energy infrastructure may struggle to keep up, potentially hindering economic growth and technological advancement. Addressing these challenges will be crucial to ensure a stable and reliable power supply for the future.

Location, location, location

Data centres are among the most energy-intensive buildings. Large facilities can consume as much electricity as a medium-sized town so it will come as no surprise that one solution has been to co-locate data centres near renewable energy sources. US firms such as CoreWeave are building facilities adjacent to wind and hydro resources in Scotland, and the AI Growth Zone is being developed specifically for its proximity to offshore wind in the North Sea and solar in the MidlandsPlacing facilities adjacent to renewable generation not only reduces transmission losses and eases grid congestion but also aligns with investors’ sustainability goals, reducing carbon footprints and ensuring a greener future for the tech industry.

However, site selection requires more than access to a wind farm. Land-use law, planning permission, cooling water availability, and fibre backhaul all shape feasibility. In practice, this could create tensions between national energy strategy and local planning regimes, particularly in regions unaccustomed to hosting industrial-scale infrastructure. Investors will need to keep on top of land, planning and energy regulations as well as community engagement, environmental assessments, and contractual arrangements between developers, operators, and off-takers.

The Case for Small Modular Reactors (SMRs)

Small modular nuclear reactors (SMRs) are set to play a pivotal role in the next generation of UK data centres. SMRs have the potential to provide stable baseload power, lower costs to consumers, and faster construction timelines. 

The Tech Prosperity Deal explicitly integrates nuclear into the data infrastructure agenda. Holtec, EDF, and Tritax have announced plans to develop advanced data centres at the site of the former Cottam coal-fired power station in Nottinghamshire, to be powered by SMRs. Another initiative located at the DP World London Gateway business park, proposes to supply the expansion of the business park with clean power by way of micro modular nuclear power plants. These investment proposals illustrate the strategic logic of investors in this area: decommissioned fossil sites offer grid interconnections, land already zoned for heavy industry, and community familiarity with energy generation. This approach not only reduces carbon emissions but also helps mitigate grid constraints and energy price volatility, aligning with the UK’s net zero ambitions.

Policy and Regulatory Implications

The consequences of the Tech Prosperity Deal should force government to address the fact that the UK cannot become an AI/tech super-hub without simultaneously investing fully in energy innovation. This requires alignment of three regulatory spheres:

1.         Planning and Permitting: Data centres and SMRs both face planning risk. Projects must satisfy local councils, environmental regulators, and, in the case of nuclear, the Office for Nuclear Regulation. Streamlining processes while maintaining safety standards is a delicate legislative balance.

2.         Energy Market Design: The current UK electricity market was not built for hyperscale demand. Contracts for difference incentivise renewables but do not resolve zonal grid stress. Capacity markets remunerate firm power, but whether SMRs qualify on favourable terms remains unresolved. 

3.         Cross-Border Regulation: By binding certain of its energy and tech strategies to US cooperation, the UK implicitly accepts a degree of regulatory harmonisation. This raises potential questions around the differences between UK and US approach to regulation, particularly where security standards or export controls may diverge. 

Market Concerns

For the private sector, the Tech Prosperity Deal is both an opportunity and a risk. The opportunity lies in massive infrastructure investment, grid upgrades and the acceleration of energy and digital technologies. 

There are however various risks involved. 

Within the UK, the government has designated data centres as critical national infrastructure, actively removing planning barriers to accelerate development. Construction researchers Barbour ABI projects a 20% growth in UK data centre capacity by 2030, with an additional 71 TWh of electricity demand expected over the next 25 years. The energy and water consumption of increased data centre presence presents a sustainability concern, with investors looking at dry-cooling and closed-loop cooling systems as alternatives. 

From a national security perspective, there is also an inherent risk associated with the concentration of power in the hands of a small number of US tech giants dominating UK computing infrastructure. Competition and anti-trust laws will inevitably become crucial considerations. If Microsoft, NVIDIA, and their peers secure disproportionate access to grid capacity and land, smaller providers could be marginalised. Consequently, the Competition and Markets Authority may face mounting pressure to ensure fair access, while policymakers must weigh industrial strategy against market concentration. Furthermore, the Cabinet Office will need to balance the aims and protections set out in the National Security and Investment Act with the commercial need to encourage and support investment in the UK, particularly in critical sectors such as data infrastructure.

Conclusion

The Tech Prosperity Deal has been frequently referred to as an AI-focused announcement. In reality, it is an infrastructure commitment that intertwines data centres, renewables, nuclear energy, and investment in the underlying grid infrastructure that needs to prop up this digital acceleration. It marks a watershed moment for the UK data centre industry, and is a strategic move towards a sustainable and future-ready digital landscape. As investments continue to flow into data centres and renewable energy, the UK’s tech infrastructure is poised for unprecedented growth and resilience. With this major new investment, alongside the creation of high-skilled employment opportunities and the promise of world-leading AI infrastructure, the UK is set to become a global powerhouse in digital technology, provided it can balance the benefits of foreign investment with the requirements of national security, grid stability and sustainable growth.

This article was written by Briony Barber.