Insight
By Spencer Lamb, Chief Commercial Officer at Kao Data
Data centres are the foundations of our digital economy and the backbone of the AI revolution. The UK’s data centre industry is heavily concentrated in and around London, with more than 85% of facilities in Slough and across West London – which together, represent the second largest data centre hub in the world.
The significant reliance on areas around London as a data centre hub puts all the industries’ “eggs” in one basket, which heightens vulnerability to electrical grid disruptions such as the one evidenced at Heathrow airport recently. Having 85% of the country’s data centres spread across a handful of postcodes also presents itself as an obvious national security risk, especially given the Government designated data centres as Critical National Infrastructure (CNI) in late 2024.
This approach also exacerbates regional economic disparities, with investment remaining in the south east. While London continues to grow as a global hub for data storage and processing, other regions within the UK are left behind in terms of technological advancement, investment and high quality job creation.
To address this imbalance, the UK must diversify its data centre footprint by following the example of European counterparts like France, Germany and Spain. These countries have distributed their data centre infrastructure across multiple cities, with France having large data centre hubs in Paris, Marseille and Lyon; Germany with data centres in Frankfurt, Berlin, Cologne and Munich and Spain with data centres in Madrid, Zaragoza and Barcelona.
The UK government’s AI Opportunities Action Plan, released earlier this year, provides a framework for establishing AI Growth Zones (AIGZs). These zones could streamline planning processes within certain regions and accelerate the development of renewable energy to provide sustainable energy sources to help power the data centres.
Greater Manchester—and the North West as a whole—is well-suited to be designated as an AIGZ, offering an alternative to London for a number of reasons. These areas offer good power connections, world class connectivity, formerly industrial brownfield land ready for development, and a skilled talent pool. They also have a well-established and growing tech and AI economy and a strong talent pathway from leading universities.
The data centre industry has already contributed £4.5 billion in Gross Value Added (GVA) to the UK economy and is projected to deliver ten times that amount over the next decade.
A large data centre can create substantial employment opportunities. Construction alone can require over 1,000 workers, while long-term operations generate hundreds more jobs within the broader tech ecosystem. Over the next decade, nearly 60,000 jobs are expected to be created by this sector across the UK.
By decentralising the UK’s data centre infrastructure and investing in areas outside of London, the UK can enhance its data centre resilience while addressing regional inequalities. With strategic planning and government support, data centres could become a cornerstone of regional regeneration and national economic growth. Greater Manchester and the North West has the potential to be the country’s pioneer in this regard, helping the UK establish a thriving secondary data centre hub.
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