Microsoft has pulled out of plans to build the UK’s largest AI data centre in a deal with Nscale.

The global tech giant, which had previously planned to fund a supercomputer at the site, has ended its involvement in the partnership leaving Nscale scouting for alternative power resources.

Plans were first announced last year, with Nscale pledging £2bn to build and open a pioneering facility in Loughton, Essex. The government hailed the agreement at the time with former Prime Minister Sir Keir Starmer highlighting the project in the UK’s AI strategy in 2025.

But concerns surrounding power supplies has led to Microsoft, which was being viewed as the anchor tenant for the centre, pulling the plug on its end of the deal.

“Our relationship with Microsoft remains strong and long-term,” Nscale said, despite Microsoft’s withdrawal, which was first reported by The Telegraph.

The two firms are engaged in tie-ups across Europe and the United States.

Nscale heading for blockbuster listing

Nscale, which was founded in London, is backed by global tech giants including Nvidia and has positioned itself as Britain’s “sovereign” datacentre.

The loss of Microsoft on the Loughton project hands a timely blow to the firm as it gears up for a blockbuster listing in New York.

It is planning to list on the New York Stock Exchange – with a target valuation of reportedly up to $35bn – while maintaining its British domicile.

The London-based firm, which has former deputy prime minister Nick Clegg and former Meta executive Sheryl Sandberg as members of its board, reported a net of loss of $1bn on revenues of $141m in the first half of the year, with the bulk of losses caused by non-cash charges.

In March the group was valued at roughly $14.6bn in a funding round led by Norwegian energy group Aker and 8090 industries. Nvidia, Dell and Nokia also participated in the round.

Microsoft was contacted for comment.