Data Centres and the UK Planning System: A Sector in Flux

Introduction

Data centres have rapidly evolved from niche infrastructure to strategic assets at the heart of the UK’s digital economy. As demand for computer power surges - driven by artificial intelligence, cloud services, and digital transformation – as the property requirements for these occupiers changes, with the consequential impact on existing stock as well as new developments, the planning system is also is also re-shaping to accommodate these requirements. Yet, despite strong Government support, the sector faces significant challenges: planning complexity, energy constraints, environmental scrutiny, and community opposition.

This article explores the current state of play, drawing together key developments in planning policy, investment trends, regulatory reform, and public sentiment. It offers a comprehensive overview for developers, investors and legal advisers navigating this fast-moving landscape.

Planning Reform: A New Direction

The UK Government, now enshrined within its ten-year infrastructure plan, has made clear its intention to accelerate infrastructure delivery, with data centres identified as a priority. The revised National Planning Policy Framework (NPPF) now explicitly supports large-scale commercial development, identifying data centres, laboratories, gigafactories (Tesla’s word to describe large industrial facilities for mass-production of electric vehicle batteries/other EV components ), and digital infrastructure as essential to a modern economy. Local plans are expected to allocate land for these uses, reflecting their strategic importance. This change is not merely rhetorical. It signals a move away from piecemeal approvals and toward a more deliberate, coordinated approach to infrastructure planning. The emphasis on cross-boundary collaboration and strategic powers for combined authorities is designed to overcome local constraints and unlock development at scale.

It is also worth noting that National Significant Infrastructure Projects (NSIPs) which are large scale nationally important projects in England and Wales are given certain dispensations and have a different processes to be approved under planning legislation. Instead of local planning permission being granted, a developer applies for a Development Consent Order (DCO) from the Planning Inspectorate who examine the application. The relevant Secretary of State (a Government minister) makes the final decision on whether to grant the DCO, informed by National Policy Statements. The rationale of the NSIP regime was to streamline the planning process. 

The Planning and Infrastructure Bill builds on this foundation. It proposes operational reforms to streamline the consenting process, including:

• Removing statutory pre-application consultation requirements for NSIPs.
• Updating national policy statements to provide clearer priorities.
• Allowing commercial infrastructure to opt into or out of the NSIP regime.
• Introducing judicial review reforms to reduce meritless challenges.
• Enabling full cost recovery for NSIP-related services by statutory bodies.

Together, these measures aim to reduce uncertainty, improve efficiency, and restore investor confidence in the planning system and as a corollary land and buildings to secure long-term investment. 

Grey Belt and the Changing Green Belt Narrative

One of the most significant developments in planning law is the emergence, or perhaps ‘acknowledgement’, of the “grey belt” concept. Traditionally, development in the Green Belt has been tightly controlled, with proposals required to demonstrate “very special circumstances.” However, recent decisions have introduced a more nuanced approach.

Grey belt land refers to areas within the Green Belt that are previously developed or contribute weakly to its original purposes - such as preventing urban sprawl or preserving the character of towns. In several recovered appeal decisions, including a 72,000 sqm data centre in Iver, Buckinghamshire (the West London Tech Park), the Secretary of State concluded that the site was grey belt and therefore not inappropriate development under the NPPF.

This distinction has allowed developers to bypass the stringent tests usually applied to Green Belt proposals, provided other planning criteria are met. It marks a significant shift in how Green Belt policy is interpreted and applied, particularly for infrastructure deemed critical to national interests.

NSIPs and Centralised Decision-Making

The Government is consulting on whether data centres should be formally included in the NSIP regime. This would transfer decision-making authority from local councils to the Planning Inspectorate, potentially accelerating approvals for large-scale projects.

While this centralisation may improve delivery timelines, it raises questions about democratic accountability and local engagement. Balancing national priorities with community interests will be essential to avoid backlash and ensure sustainable development.

Investment Momentum and Real Estate Dynamics

The UK data centre sector is attracting unprecedented investment. Hyperscalers such as Amazon Web Services, Microsoft, and Google are committing billions to expand their UK footprint. Real estate investors are increasingly drawn to the sector, recognising its long-term value and strategic importance. Microsoft, Nvidia and other US tech firms have pledged over $30 billion to be invested in the Uk to make it an “AI Superpower” in the words of Mr Huang (CEO of Nvidia).

According to industry estimates, data centres contribute over £4.7 billion in gross value to the UK economy and support more than 40,000 jobs. The sector is expected to grow significantly over the next decade, driven by AI adoption, cloud migration, and the proliferation of digital services.

However, the investment landscape is complex. Lease structures differ from traditional commercial arrangements, with landlords often responsible for infrastructure costs such as power, cooling, and security systems. Planning uncertainty, grid constraints, and sustainability pressures add further risk, making legal due diligence and strategic site selection critical.

The Government’s designation of data centres as Critical National Infrastructure (CNI) in 2024 has helped boost investor confidence. It signals long-term policy support and offers enhanced protection in the event of cyberattacks, outages, or other disruptions.

Blackstone and USS

Blackstone, in partnership with the Universities Superannuation Scheme, Britain’s largest pension fund, is building a ‘hyperscale’ £10 billion data centre on the former Britishvolt (failed battery start-up) site in Cambois, near Blyth, Northumberland. The project was approved by Northumberland County Council in March 2025. Operated by Blackstone's subsidiary QTS, this hyperscale campus is expected to create thousands of jobs and attract significant investment into the area. The facility is aimed at servicing AI, cloud computing, and enterprise clients requiring high-performance computing. 

Energy Constraints: The Sector’s Achilles Heel

Power supply is the single greatest constraint on data centre development. Many sites face grid connection delays stretching years into the future, with some projects reportedly waiting until 2040. These delays are commercially untenable and threaten to derail growth.

Ofgem’s TM04+ reforms aim to prioritise “ready and needed” projects in the connection queue. While demand-side projects like data centres are deemed “needed,” satisfying the “readiness” criteria - such as securing land rights and planning status - remains a challenge.

The National Energy System Operator (NESO) is developing a Strategic Spatial Energy Plan to align energy infrastructure with future demand. This includes modelling the impact of AI, quantum computing, and other high-performance applications. However, implementation will require coordination across Government, regulators, and industry.

Sustainability and Environmental Scrutiny

Data centres are energy-intensive, and their environmental impact is under increasing scrutiny. Operators are investing in renewable energy, advanced cooling technologies, and heat recovery systems. Some proposals include vertical farms and ecology parks to offset carbon emissions and biodiversity loss. 

Yet critics argue that these measures are insufficient. In areas like Slough and West London, data centres have strained local power and water supplies, prompting warnings from utility providers and planning authorities. Thames Water, for example, has threatened to restrict services to data centres unless consumption is curbed. 

It is hoped that in the coming years we will see more joined up thinking around the co-ordination and/or or combined uses of such technologies to offset environmental impacts at a community level, such as the siting of a data centres near energy hungry leisure facilities to make best use of excess heat.

Sustainability reporting requirements are also tightening. The Climate Change Levy, Climate Change Agreements, and Streamlined Energy and Carbon Reporting (SECR) all apply to data centres, with potential reforms on the horizon to incentivise decarbonisation.

Community Opposition and Global Activism

As awareness of data centres grows, so too does opposition. In North Ockendon, residents are fighting a proposed 215-hectare development, citing concerns over traffic, water use, and environmental degradation. Similar protests have erupted globally - in Ireland, Portugal, the Netherlands, and Latin America - where data centres are seen as competing with communities for scarce resources.

Developers are responding with promises of local investment, biodiversity net gain, and community benefits. However, without transparency and genuine engagement, these efforts risk being dismissed as greenwashing.

The UK must learn from international examples. Ireland’s partial moratorium on new data centres, driven by grid strain and emissions concerns, offers a cautionary tale. In Portugal, a data centre scandal contributed to the resignation of the Prime Minister. These cases highlight the importance of strategic planning, community involvement, and regulatory clarity.

Conclusion

The UK data centre sector stands at a crossroads. Government policy is increasingly supportive, and investor interest is strong. But the path to delivery is fraught with legal, environmental, and political challenges.

Success will depend on strategic site selection, early stakeholder engagement, and a clear understanding of the evolving regulatory landscape. For developers, investors, and advisers alike, the message is clear: whilst data centres are often referred to colloquially as ‘sheds’ - they are now a critical piece of infrastructure shaping the future of the UK’s digital and wider economy.