The UK Government has announced a major reform package aimed at accelerating the expansion of domestic AI data centre infrastructure through newly designated AI Growth Zones. The policy, presented to Parliament by the Secretary of State for Science, Innovation and Technology, positions AI as a strategic national priority and outlines how the UK intends to compete globally in the race for compute capacity.
Officials said artificial intelligence is reshaping global economies, societies, and security systems, making onshore data centre capability essential for protecting sensitive data and ensuring technological resilience. The Government’s ambition is to make the UK a world leader in AI innovation and adoption, with benefits extending across industries and regions.
According to the paper, the country’s data centre ambitions are being constrained by slow planning processes, long grid-connection delays and insufficient power availability. AI Growth Zones are intended to remove these bottlenecks, create investment-ready regions, and unlock billions of pounds in private capital.
The Government argues that clustering large-scale investments in specific areas will allow the UK to rapidly build out compute capacity, strengthen local economies, and reinforce national security. While some AI workloads will continue to be hosted offshore in commercial partnerships with allies such as the US and the EU, ministers insist that Britain must secure independent capability “where it matters most”.
The package spans reforms across energy, planning, skills, and investment, with the Government claiming the measures could cut data-centre connection timelines by up to five years and save a typical 500 MW facility around £80 million annually in electricity costs. Up to £100 billion of additional investment and more than 10,000 jobs are expected to flow into AI Growth Zones over time.
ACCELERATING GRID CONNECTIONS
The Government identified slow grid connections as the single biggest barrier to establishing AI Growth Zones. The grid queue is currently oversubscribed and distorted by speculative applications that block capacity for priority projects.
To resolve this, the Government will:
- Remove speculative demand from the grid queue and reallocate freed-up capacity to AI Growth Zones and other high-priority projects.
- Introduce two new mechanisms:
- A reallocation mechanism giving AI Growth Zones priority access to capacity released by dropped or cancelled projects.
- A reservation mechanism allowing future capacity to be held for strategic sites.
- Use new powers in the Planning and Infrastructure Bill to prioritise strategically important projects for grid connections.
- Work with Ofgem and the National Energy System Operator to update codes and licences to embed these changes.
The policy also opens the door for developers to self-build high-voltage grid infrastructure, rather than waiting for network operators. Government teams will explore models such as “build and transfer” and “build and operate”, and implement regulatory changes where needed.
Additionally, data centre projects within AI Growth Zones will gain access to a new Connections Accelerator Service, which will provide enhanced engineering support to help resolve connection barriers.
BRINGING DOWN ENERGY PRICES
The Government plans to incentivise data centre development in regions where local energy generation outpaces transmission capacity, such as Scotland and northern England. Locating data centres in these areas can absorb surplus renewable power and reduce national grid constraint costs.
From April 2027 (subject to legislation), eligible AI Growth Zone projects will receive discounts on electricity costs of up to:
- £24/MWh in Scotland
- £16/MWh in Cumbria
- £14/MWh in the North East
The scheme will recycle system-wide savings back to developers located in regions that strengthen grid efficiency. A review is scheduled for 2030. The Government says the mechanism will not increase costs for other consumers.
REDUCING PLANNING BARRIERS
Planning delays remain a major challenge for large-scale digital infrastructure. To streamline the system, the Government will introduce several reforms:
- Update national policy guidance within three months to explicitly recognise AI data centres as nationally important.
- Consult on changes to the National Planning Policy Framework and publish a National Policy Statement for Data Centres, clarifying the evidence case, parameters, and thresholds for large projects.
- Consider whether AI data centres should receive Critical National Priority (CNP) status.
- Create a £4.5 million national team of AI data centre planning specialists to support local planning authorities and improve decision quality.
- Use safeguarding powers to protect land in England designated for AI Growth Zones and prevent conflicting development.
- Update consultation procedures so key applications can be referred to the Secretary of State, enabling direct intervention where decisions are blocked.
For very large facilities requiring Nationally Significant Infrastructure Project (NSIP) approval, the Government will explore reducing Development Consent Order timelines from 18 to 12 months.
Ministers emphasised that this is only the starting point and invited further discussions with developers and local authorities on additional planning reforms.
BENEFITS FOR PEOPLE AND LOCAL ECONOMIES
The Government stressed that AI Growth Zones must deliver broad economic value, not just infrastructure. Investments in talent and local innovation will form a core part of each zone’s strategy.
Building on the £187 million TechFirst programme, the Government plans to:
- Introduce short AI courses funded through the Growth and Skills Levy.
- Explore a new 16–19 qualification in data science and AI.
- Establish five new Digital and Technologies Technical Excellence Colleges.
Each AI Growth Zone will also receive up to £5 million to support local AI adoption programmes, research, start-up growth, and community benefits.
In England, local authorities will retain 100% of business rate growth generated within AI Growth Zones for 25 years, potentially generating £5–10 million per site annually once infrastructure is completed.
CREATING A STRONGER INVESTMENT ENVIRONMENT
To coordinate the scale and complexity of national AI infrastructure development, the Government will launch a dedicated AI Growth Zone Delivery Unit in January. The unit will:
- Act as a single point of contact for investors and developers.
- Maintain a pipeline team to identify suitable sites and guide them through assessment.
- Oversee a delivery team that assigns dedicated account managers to each zone.
- Run taskforces that coordinate between developers, utilities, planners, and government officials.
- Provide guidance on accessing support, including new power-price incentives.
Public sector finance bodies, including the National Wealth Fund and UK Export Finance, will also explore co-financing commercially viable AI data centre projects.
