UK considers forcing data centres to invest locally to meet new AI ‘covenant’

The UK government is considering new requirements for data centre developers to invest in local communities as ministers seek to head off public opposition to new AI infrastructure.

The option would form part of a proposed “covenant” for the sector, a list of conditions for developers to meet, and could be made public in time for this week’s Budget, according to two government figures.

Other conditions being considered include sustainability requirements and specific agreements on energy use, potentially in return for the projects being given priority access to the electricity grid.

Ministers are seeking ways to balance public opinion with the infrastructure construction needed for the widespread adoption of AI. The build-out has already been hindered by slow planning processes and grid connection delays.

Kanishka Narayan, appointed AI minister by Prime Minister Andy Burnham in July, said he was “determined” to ensure people were “able to build British infrastructure, especially in areas like AI that are driving growth and creating revenue for public services.”

He told the FT that the government would not leave the nascent technology to “foreign firms and foreign billionaires” and promised a “distinctly Labour approach to British AI” that would use state power “to shape much more deeply the trajectory of technology” in line with the public interest.

One of the people said officials were looking at ideas that would form a “data centre covenant” for developers to meet, likely in exchange for priority access to the power grid or accelerated planning approval.

“We can’t have a total ‘let the tech bros build, build, build’ [approach],” the person said, adding there had to be “some kind of framework that means local communities are empowered.”

The form of any possible requirement for local investment had not yet been decided but could take the form of “direct cash” or building infrastructure, they said.

Any measures from the UK, which wants to triple its computing capacity to 6GW by 2030, would follow moves in other countries to manage the scale, speed and sustainability of an industry known for using large amounts of resources, particularly energy.

Australia, Malaysia and several US states have introduced or are considering mechanisms such as tax breaks or priority grid access to accelerate data centre developments, depending on characteristics such as their emissions, investment commitments or whether they can generate their own energy.

The risk is a wave of opposition to the build-out similar in intensity to that of the US, where roughly $200bn worth of data centre development has been disrupted or delayed this year amid a public backlash, according to research group Data Center Watch.

Burnham has emphasised the importance of local communities reaping the “benefits of AI and data centre investment” and pointed to local authorities’ ability to keep additional business rate revenue generated by infrastructure in so-called AI Growth Zones, designated sites around the country for the accelerated build-out of data centres.

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The second UK government figure said government was aiming for a “clearer statement on what good digital infrastructure development looks like” by outlining the “trade-off” for the areas in which data centres are located.

A third person familiar with the government’s thinking said the value of the proposed investment in a local area could depend on the size of the proposed project.

The Cabinet Office did not respond to a request for comment. The Treasury declined to comment on Budget speculation.