Digital powerhouses: opportunities in UK & EU data centre investment

Data centres are becoming an increasingly essential part of infrastructure investment portfolios driven by the exponential growth of AI and cloud computing.  

In our biannual survey of investor sentiment, there has been growing interest shown in the investment opportunity of data centres as an asset class. Hyperscale data centres, to a greater extent are being viewed more as infrastructure rather than real estate, offering long-term, predictable cashflows through contracts often with creditworthy tech giants like Google, Amazon, and Microsoft. This momentum has been visible in recent landmark deals such as KKR and Singtel’s US$1.3bn investment in ST Telemedia Global Data Centres, and Blackstone and Canadian Pension Plan Investments acquiring major data centre operator AirTrunk for US$16bn, the largest data centre acquisition to date, taking place in September 2024. 

Interest and confidence in the data centre sector among investors is growing rapidly. However, as demand accelerates faster than regulatory and environmental frameworks can adapt, better alignment between market opportunity and policy is becoming critical. Governments are now updating planning rules, grid strategies, and data legislation to keep pace. Against this backdrop, GIIA has analysed the evolving policy and regulatory landscape and its impact on data centre investment in the UK and Europe. 

Data policy, sovereignty, and regulatory frameworks 

The UK government's designation of data centres as Critical National Infrastructure (CNI) in September 2024 represents a significant shift in the government’s view of data centres as strategically important assets to national resilience in the same league as energy infrastructure. It is hoped that the CNI designation will reassure investors as to the government’s priority to protect and facilitate data centre operations. According to a recent survey, the response to this announcement has been overwhelmingly positive with more than 90% of respondents, including data centre owners, operators, and developers, supporting the CNI designation and planning reforms.  

In a further example of the UK government looking to support data centre build out, they will be eligible for designation as Nationally Significant Infrastructure Projects (NSIPs), benefiting from expedited planning approvals at local and national levels. This policy momentum has coincided with a wave of major investment announcements: Blackstone revealed plans to invest £10bn in Europe's largest AI data centre in Northumberland, while Amazon and Microsoft committed a combined £10.5bn over the next three to five years to expand hyperscale infrastructure across England. With nearly 25% of the total power capacity, the UK represents a significant portion of the European data centre market, positioning itself as a central hub for AI and cloud infrastructure on the continent.  

Data sovereignty, referring to the jurisdictional control over data storage and processing, is increasingly shaping strategic decisions around digital infrastructure deployment. In the regulatory domain, the UK is navigating a post-Brexit balance between maintaining equivalence with EU data laws and introducing its own, more flexible framework. The Labour government introduced the Data (Use and Access) Bill (DUA Bill) in October 2024, aiming to modernise the UK's data regime by improving access for research and innovation while maintaining high standards of privacy and security.  

Building on these goals, the DUA Bill outlines a series of reforms designed to enhance data use across sectors, drive economic growth, and improve public services. Key provisions include the establishment of a Digital ID Trust Framework, reforms to the Information Commissioner's Office, and adjustments to regulations governing automated decision-making and international data transfers.​ If passed in its current form, it could create a more innovation-friendly environment, which in turn could increase demand for UK-based data centre capacity. To further support this, the UK government has pledged to streamline planning and permitting processes for critical digital infrastructure, including data centres, to accelerate the buildout needed for greater data sovereignty and AI development. 

The DUA Bill reflects a regulatory environment that may be slightly less stringent than the EU's General Data Protection Regulation (GDPR), potentially lowering operational costs for data centre tenants. However, this regulatory flexibility brings a key risk: the UK’s continued ability to facilitate cross-border data flows with the EU, which currently depends on its “adequacy” designation granted by the European Commission in 2021 to allow personal data to move freely from the EU to the UK. This decision is subject to review in 2025, and any perceived divergence from EU standards could put the UK’s adequacy status at risk. For businesses that operate across borders, a potential change could determine whether data flows smoothly between the UK and EU markets or becomes subject to additional compliance burdens, potentially limiting the appeal of UK data centre infrastructure to global investors. 

This potential divergence is particularly significant when contrasted with the EU’s own regulatory landscape, where a comprehensive and stringent framework underpins the data centre market which provides both certainty and complexity. The GDPR, introduced by the EU in May 2018, was a watershed moment that synchronised data protection standards across member states, significantly strengthened individuals' rights over personal data, and imposed stringent obligations on organisations handling that data both within and outside the EU. GDPR’s strict rules on personal data handling (and restrictions on transferring EU citizens’ data to jurisdictions with weaker protections) have made data localisation an essential strategic requirement for many companies seeking to ensure compliance and maintain customer trust.  

To appease these strict rules, large cloud providers have responded by expanding data centre infrastructure in Europe. For example, Microsoft’s newly completed EU Data Boundary project now enables EU public and commercial customers to keep all their cloud data within EU/EFTA data centres. Building out digital infrastructure in Europe has become a strategic necessity for global cloud providers to maintain access to the region's large and highly regulated digital market. This is not necessarily a response to regulatory preferences, but rather a recognition that localisation is now a prerequisite for doing business at scale within the EU. 

Beyond GDPR, the EU is rolling out additional legislation such as the 2023 Data Act, set to be implemented in September 2025, which introduces rules to facilitate access to and sharing of non-personal data, and notably includes provisions to prevent non-EU governments from unlawfully accessing European data. Cloud providers in Europe will be required to resist or challenge extraterritorial data requests that conflict with EU law​, as EU regulators seek to ensure no foreign government can access EU data without oversight. This creates a high compliance environment, which can increase operating costs and complexity while also improving the value proposition of facilities in the EU, as effective regulatory compliance potentially positions data centres in this market as lower-risk. 

Market & grid readiness 

Data centres are energy intensive, and parts of the UK grid are already struggling to meet demand. In Greater London, a notable surge in data centre developments has saturated the local energy network, leading the grid operator to warn of no new electricity connections in some areas until 2035. Beyond London, grid connection delays threaten to stall expansion plans. Microsoft warned in 2025 that its £2.5bn UK data centre rollout could be hindered by power shortages, with some new sites unable to access the grid before 2035. Also, National Grid projects that data centre electricity demand in the UK could increase six-fold into the next decade. 

Another hurdle is the UK planning system itself, historically an overly complex process lacking clarity. This has slowed not only data centre buildout but also the delivery of critical grid infrastructure needed to meet soaring power demands driven by AI. Data centres often fall outside standard planning classifications, leading to inconsistent decision-making by local authorities and significant delays. These planning barriers also affect the development of new energy connections, limiting power supply for energy-hungry AI workloads. However, some confidence can be taken from how the UK government is actively addressing these challenges through the new CNI status of data centres and its consideration of fast-tracking large-scale projects via NSIP designation. This tension between infrastructure readiness and digital ambition is echoed across Europe, where data centre markets are growing rapidly but continue to face similar regulatory and energy-related bottlenecks. 

Europe offers a large and mature data centre market, second only to the US in scale. Key hubs such as Frankfurt, London (still Europe’s largest single data centre cluster, albeit in the UK), Amsterdam, Paris, and Dublin (the “FLAP-D” markets) host a significant share of the continent’s servers. Hyperscale development is also accelerating as Europe accounts for roughly 17% of worldwide hyperscale data centre capacity, far behind the US’s 51% share but on par with China. To put this into perspective, the US has over 5,400 active data centres, while Europe as a whole contains just over 1,200. 

New capacity is being added rapidly to meet rising demand, with European data centre power consumption projected to almost triple from ~62 TWh in 2022 to over 150 TWh by 2030. By the end of the decade, data centres should consume about 5% of Europe’s electricity supply. European governments actively support data centre investment to grow their digital economy. However, planning and permitting, as well as energy and grid availability, continue to be major obstacles to investment readiness. The high water usage as a coolant for data centres is also emerging as a growing regulatory and reputational pressure point, particularly in markets facing water stress, adding another layer of complexity for developers. 

In major hubs like Dublin, strict conditions, such as policies requiring new facilities to generate their own power, highlight growing tensions around land use, grid capacity, and environmental constraints. Grid connection timelines in hubs like Frankfurt and Dublin can take up to 3-5 years due to infrastructure bottlenecks. These constraints are driving policy shifts that reflect growing uncertainty as demand on the grid increases. While the EU’s energy transition is advancing with record investments in clean technology, around 40% of Europe’s electricity infrastructure is over 40 years old and nearing the end of its lifespan. This ageing infrastructure contributes to energy losses and creates serious bottlenecks, limiting the pace at which renewable energy can be integrated, and further complicating data centre development and energy sourcing strategies. 

Comparative outlook 

Both the UK and EU are actively reshaping their policy environments to support data centre growth, but their approaches reflect varying strategic priorities and operational conditions. The UK has taken clear steps to position itself as an investment-ready market, allowing for greater regulatory flexibility and strategic prioritisation of data centres as Critical National Infrastructure. The DUA Bill also highlights the increased direction of focus on creating an innovation-friendly environment, which could in turn attract more cloud service providers and create more tenants for the data centres. However, this same flexibility introduces a level of upcoming uncertainty regarding the UK’s data adequacy status with the EU. While being under review this year, it remains a key risk for cross-border operators should the UK fail to retain its status. 

By contrast, the EU offers a highly stable but more complex regulatory environment. The GDPR, the upcoming Data Act, and the EU’s broader digital sovereignty agenda provide strong legal clarity but raise the compliance standard for data centre operators and tenants. While this regulatory certainty can enhance the long-term value of compliant infrastructure, it is paired with structural challenges in planning timelines, grid constraints, and increased environmental scrutiny in the FLAPs markets. Moreover, the EU’s regulatory influence extends far beyond its borders through the so-called "Brussels Effect" whereby access to the large single market effectively compels international players to conform to EU standards, reinforcing the global impact of its data centre regulatory model. 

The UK offers near-term opportunity, albeit with ongoing grid and planning challenges. Meanwhile, the EU, represents a more mature and expansive market, yet demands greater upfront compliance and long-term policy navigation. Both markets face shared challenges around grid capacity, land use, and environmental constraints, though these are being addressed through differing policy mechanisms.  

As data centre demand continues to accelerate, the UK and EU face a common imperative: to align regulatory ambition with infrastructure readiness. Whether through the UK's flexible innovation-first approach or the EU's robust sovereignty-driven model, long-term competitiveness will come down to how effectively each market can navigate the tension between rapid growth and sustainable, secure digital infrastructure.