UK Data Centre Growth Lags Amid Infrastructure Bottlenecks
The global demand for data centres is accelerating at an unprecedented rate. With artificial intelligence (AI), cloud computing and digital services driving relentless data growth, infrastructure is under pressure to scale quickly too. While the United States is investing and building rapidly to meet this demand, the United Kingdom faces structural headwinds that could limit its potential and competitiveness.
At Argo Infrastructure Partners, our investment strategy focuses on long duration, essential infrastructure. We see digital infrastructure, particularly data centres, as a core enabler of modern economies. The divergence between the US and UK markets offers a clear lesson: growth depends not only on demand, but on foundational elements like energy, permitting and capital availability.
The US: Scale, Speed and Capital
The US is leading the global data centre buildout. According to Scott Wilcoxen, Global Head of Digital Infrastructure at J.P. Morgan, the scale of current investment is unlike anything seen before. In a recent episode of What’s the Deal?, Wilcoxen noted that hyperscalers are shifting from 50 megawatt (MW) facilities to gigawatt (GW)-scale campuses, each representing more than $10bn in investment.
US tech giants are expected to spend more than $325bn on infrastructure in 2025 alone. Demand is fueled by both AI workloads and legacy cloud growth. Wilcoxen cites projections of 100GW in additional capacity needed by 2030, potentially requiring more than $1 trillion in new data centre investments.
Argo’s US investments reflect this opportunity. Through our portfolio company TierPoint, a leading provider of secure, connected, and scalable data center and cloud solutions, we support enterprise and hybrid cloud clients across the country. TierPoint exemplifies how strong infrastructure, resilient energy supply and development partnerships can power high-performance data environments in a rapidly evolving digital landscape.
The US advantage is clear: abundant land, lower energy costs, faster permitting and access to a deep capital stack that includes institutional debt and equity. Together, these factors allow data centre operators to move and grow at speed and scale.
The UK: Constrained by Energy Costs and Grid Access
In contrast, the UK’s data centre market faces significant constraints. While London remains a top-tier global hub for connectivity, new large-scale builds are being slowed by two key challenges: high energy prices and limited grid availability.
UK electricity prices remain among the highest in Europe, nearly double those in many US states. For data centres, which require large amounts of continuous power, this undermines long-term profitability. After capital costs, power is the single input largest cost. Compounding this is grid congestion and lead time for actual grid connection. In areas like Greater London and the surrounding areas, developers report multi-year delays – sometimes five years or more – for grid connections.
Electricity is roughly two or three times more expensive in the UK than in the US. UK prices are higher due to factors like energy taxes, infrastructure costs, renewables, and a higher reliance on imported energy. This is a result of multiple decades of inconsistent and poor policy on energy supply. The failure is now highlighted by the shifting relevance of power cost and data demand. This is the new “heavy” industry of the developed world economics. With this single biggest factor, other than demand, being power cost.
These delays impact service, competitiveness and capital deployment. Investors are hesitant to commit to large-scale developments without energy certainty.
Nuclear Power: The UK’s Best Strategic Lever
This is where nuclear energy, particularly small modular reactors (SMRs), could reshape the UK’s data centre future. Traditional renewables like wind and solar cannot provide the 24/7 baseload power that hyperscale campuses require. Nuclear energy can.
Rolls-Royce, with UK government backing, is making real progress on its SMR program. These compact reactors offer scalable, low-emission power with faster deployment timelines than traditional plants. Crucially, they could provide on-site or near-site power for major data centre campuses, solving both the price and connection challenges.
SMRs are a potential enabler of long-term digital infrastructure growth in the UK and lowering energy costs with increased long-term reliability. We have experience investing at the intersection of energy and infrastructure, and we believe nuclear, if paired with private capital, could transform the landscape for high-density digital assets in the UK, US and other developed markets.
Capital Markets: Depth vs. Fragmentation
The difference in capital formation between the US and UK is also striking. In the US, investors benefit from a mature ecosystem with large funds, credit providers and long-term counterparties. As Wilcoxen explains, even $25bn infrastructure funds are deploying multiple layers of capital, from senior debt to structured equity, into data centre platforms.
In the UK, capital exists but is more fragmented. Developers often lack the scale or balance sheet to secure the energy contracts and financing needed for hyperscale builds. Without reform in planning and energy access, the UK risks falling behind in a global competition for infrastructure capital.
Conclusion
The US and UK have clear strengths, financial expertise, a strong tech sector, and a strategic location, but addressing energy supply and planning constraints is required. In the US, we see momentum and proven success through platforms like TierPoint.
The future of digital infrastructure will belong to those who can build reliably, sustainably, and at scale. In both US and UK markets, energy is no longer a supporting factor, it’s the main driver for sustainable growth.
For more on Argo’s infrastructure investment strategy, visit argoip.com.