Build more data centres or lose AI race, London warned

Britain can cement itself as a leader in generative AI, but it needs to scale up its digital infrastructure, according to the UK and Ireland managing director of data centre REIT giant Digital Realty.

Speaking to City AM, Séamus Dunne said building more data centres in the capital is crucial to support the next phase of AI development, particularly as Britain races to stay ahead of the rest of Europe.

“I really just think for the UK, but particularly London, it’s one of the biggest opportunities I could see happening,” he explained.

“Europe, unfortunately, overall is not going fast enough, which means they’re falling behind the development of these technologies, particularly generative AI, versus the United States and China, who are already streets ahead.”

As AI transitions from training to real-time application across sectors like financial services, retail, and pharmaceuticals, the need for high-speed processing and enormous computational capacity is rising fast. 

Unlike traditional cloud computing, AI demands specialised data centres for both the training and model deployment, known as inference. While training can be done remotely – and is likely to happen in Scandinavia and the Nordics thanks to cheaper power and renewable energy – inference must happen close to where businesses are deploying their AI models.

Digital Realty’s expansion plans

“The real development of the infrastructure has to be for inference,” Dunne explained, “and it has to be first in London. That’s where it’s going to get used.”

Digital Realty, a US-listed REIT, is capitalising on booming demand for data centre capacity. With plans to ramp up development in London, Dunne revealed it is exploring sites across West and South London, the City and the Docklands, to meet AI needs.

It is not the only one. Digital infrastructure investor Goldacre recently told City AM it is planning a data centre in the Newham borough of London, that could be one of the most powerful in the country.

The UK government recently recognised data centres as Critical National Infrastructure (CNI) and Labour has proposed easing planning restrictions to accelerate development. For the first time, data centres could be treated as “nationally significant” infrastructure, alongside major transport and energy projects.

Sustainability and grid strain

Not everyone, however, is happy about the prospect of more data centres.

Concerns about energy usage and environmental impact have led cities like Dublin and Amsterdam to halt new developments. Dublin’s grid is smaller than the UK’s, but data centres consume over 20 per cent of its power.

The International Energy Agency predicts global electricity consumption by data centres could more than double by 2026, surpassing Japan’s total energy usage. And experts have forecasted that, by 2027, AI demand could lead to water withdrawal worth nearly half of the UK’s annual consumption.

Digital Realty has committed to 100 per cent renewable energy and carbon-free operations.

Local opposition is growing too. In Hertfordshire, residents of Abbots Langley oppose a planned data centre near the M25. “People have chosen to live in a village and not an industrial site,” said local councillor Vicky Edwards.

Last year, a Conservative government minister vetoed a plan to build a data centre on a former quarry next to the M25, partly because it would spoil the views from the motorway’s bridges.

“I’m not making a case for unfettered development of anything,” Dunne said, “but building the right digital infrastructure and the right renewable energy with the right type of grid is probably the biggest competitive advantage – if it’s done right – that the UK could possibly have.”