Artificial Intelligence and Data Centers: A View from the UK and EU

The Plan recommends a range of policies and actions for the government to take as part of its overarching aspiration to kickstart broad-based economic growth. The Plan commits to three goals:

• Investing in the foundations of AI
• Pushing hard on cross-economy AI adoption
• Positioning the UK to be an AI maker, not an AI taker

The first of these goals is the most dominant section in the Plan—capturing 30 of the 50 total recommendations. This section focuses on, among other things, building sufficient, secure and sustainable AI infrastructure through recommendations aimed at facilitating the accelerated build out of AI data centers, mitigating the sustainability and security risks of AI infrastructure, and long-term planning for the UK’s AI infrastructure needs.

Bold Bureaucracy: AI Growth Zones (AIGZs), AI Energy Council and “Critical” Designations

Building the UK’s AI Infrastructure
The government’s response to the Plan highlights a strong commitment to investment in the foundations of AI through infrastructure support and policy reform. All 50 recommendations set out in the Plan have been adopted by the government with promised delivery timelines.

To drive the government’s goal of building sufficient, secure and sustainable data infrastructure, the Department for Science, Innovation and Technology will publish a long-term plan for the UK’s AI infrastructure needs and is committed to setting out a 10-year roadmap. While specific details remain under wraps, key focus areas are expected to include (i) addressing security concerns, (ii) sustainability and energy, (iii) supply chain resilience and (iv) the pursuit of sovereign AI compute—public-sector-owned or allocated infrastructure to ensure national capability and strategic independence.

AIGZs: Unlocking Investment
The government has also introduced AIGZs, a public-private initiative to consolidate AI infrastructure development in strategic locations within the UK. This initiative is designed to streamline data center planning, while offering fast-tracked regulatory approvals and priority access to clean energy—incentives aimed at making the UK more attractive to investors. Through this, the government aims to unlock private capital, support technological innovation and drive local economic rejuvenation through job creation and regional growth, ensuring the UK remains globally competitive in the rapidly evolving AI landscape.

In January 2025, the government announced that the first pilot AIGZ would be established in Culham, Oxfordshire, just 1.5 hours from London and home to the UK’s Atomic Energy Authority, selected in part for its high-capacity connection to the UK’s national grid, available land and proximity to highly skilled human capital. The process for identifying a private-sector partner for the pilot AIGZ will commence in Spring 2025.

On February 10, 2025, the government opened bidding by inviting local authorities and data center developers to submit expressions of interest for the development of additional AIGZs. The formal selection process commenced during Spring 2025 and remains open for submissions. The initial proposals will help to inform the final selection of sites and broader policy decisions.

AI Energy Council: Addressing Energy Constraints
Energy access and grid capacity remain critical bottlenecks for data center expansion in the UK, with operators now actively exploring on-site gas generation and private grid solutions to bypass connection delays, which can exceed 10 years. Currently accounting for approximately 1-2% of the UK’s total electricity usage, energy demand for data centers is projected to rapidly expand alongside demand for AI. To tackle this challenge, the government announced in its response to the Plan the formation of an AI Energy Council, co-chaired by the Technology Secretary and the Energy Secretary and formed of industry leaders. The AI Energy Council, which has met twice since its formation, will guide energy policy investment in infrastructure, devising innovative energy solutions with a focus on clean energy.

Energy is one of the greatest areas of skepticism in the government’s overall strategy, with the UK having some of the most expensive energy prices in the world, and aspirational net-zero targets, which have been labeled as unrealistic by industry leaders. A report published on February 10, 2025, by the Social Market Foundation has aimed to put pressure on the government to introduce zonal pricing to enable cheaper energy access where there is greater supply—an arrangement which could make Scotland’s energy prices the lowest in Europe and spread regional growth and opportunities to remote areas. With the new AI Energy Council available to direct influence towards, industry voices could have more sway on policy going forward.

Data Centers as Critical National Infrastructure (CNI)
In September 2024, the Technology Secretary designated data centers as “Critical National Infrastructure”—the first new CNI classification in almost a decade since the space and defense sectors were added to the CNI register alongside other existing critical sectors, such as transport, energy and health. The designation means that data centers in the UK will receive greater support from the government to monitor, prepare for and respond to threats, such as natural disasters and targeted cyber-attacks. A key focus of the CNI designation is cybersecurity. Among other support, data centers will now enjoy prioritized access to the National Cyber Security Centre—the government agency which bridges industry and government on all things cyber security.

Although the CNI designation does not directly alter the legislative framework, it serves as a strong indicator of the evolving direction of the UK’s cybersecurity regulatory landscape. Currently, this area is governed by the UK Network and Information Systems Regulations 2018 (NIS), which implement the EU Directive 2016/1148 (NIS 1). In the EU, Directive 2022/2555 (NIS 2) officially replaced NIS 1 in October 2024, which expanded the types of in-scope entities and enhanced the powers of enforcement and supervision available to authorities in each EU Member State. The UK government is expected to reflect the expanded scope of NIS 2 in the highly anticipated Cyber Security and Resilience Bill which will be introduced in Parliament this year. As with NIS 2, the Cyber Security and Resilience Bill is likely to apply to data center service providers who could become subject to detailed security and reporting requirements. For a detailed discussion on NIS 2, see our earlier Client Alert.

The government hopes that improving the resilience of data infrastructure and the industries it supports will not only protect critical services but also attract foreign investment and job creation.

Planning Reform: Addressing Development Hurdles
Due to the scale of modern data centers and their acute infrastructure requirements, obtaining planning permission has presented delays and hurdles to new developments. In July 2024, the government updated its National Planning Policy Framework, which sets out the government’s planning policies for England and how the government expects local authorities to apply them. The updated framework introduces explicit support for data center expansion which will pave the way for more accommodating decisions and policy on green-belt development and the identification of suitable locations for data centers.

The government has also confirmed that it will include data centers in its Nationally Significant Infrastructure Projects (NSIP) consenting regime, which streamlines the consenting process for infrastructure projects over certain thresholds.

While the development of planning reforms and policy shifts as they relate to data centers have thus far been quite piecemeal, stakeholders will be paying close attention to the upcoming Planning and Infrastructure Bill (currently at the committee stage in the House of Lords) to see how the government ties these actions together and enables accelerated data center expansion.

Global Investments in AI and Data Centers Presents Competition
The UK government has taken a front seat approach in channeling private sector investment to strengthen its position in the global data center landscape. Between July and October 2024, over £25 billion was committed to new data center projects across the country. The government appears confident that its policy work will encourage even greater investment, announcing over £14 billion in new investment since the launch of the Plan just last month.

The substantial investments in the UK, however, are modest compared to the United States’ “Project Stargate,” a $500 billion initiative launched in January 2025 by OpenAI, SoftBank, Oracle and MGX to build AI infrastructure. For a discussion focused on progress in the United States, see our recent Client Alert. Similarly, ahead of the AI Action Summit in Paris, on February 9, 2025, France announced a €109 billion ($112.6 billion) investment in its AI sector, which includes a €30 to €50 billion commitment from the UAE to finance a 1-gigawatt data center, almost four times the power capacity of the UK’s largest operational facility. For our discussion on the AI Action Summit, see our blog post.

Regulation in Europe: EU AI Act and the EU Data Act
A key aspect of the EU’s approach to AI is a focus on regulation. The EU has advanced regulation significantly in key areas, including the introduction of comprehensive legislation governing AI. Regulation (EU) 2024/1689 (the EU AI Act) establishes a harmonized framework that categorizes AI systems into prohibited, high-risk, limited-risk and minimal-risk, with corresponding regulatory obligations. High-risk AI systems encompass applications critical to the safety of essential infrastructures, such as data centers. For example, AI systems used to monitor water pressure or manage fire alarm controls in cloud-computing centers are classified as high-risk and must comply with stringent regulatory requirements. In contrast, AI systems developed exclusively for cybersecurity purposes may not fall within the high-risk classification. Organizations deploying high-risk AI systems must conduct rigorous risk assessments, adhere to strict safety standards and implement robust data governance measures to ensure the security and reliability of AI in critical sectors. For more insights into the EU AI Act and its implications, see our recent Client Alert.

As well as the EU AI Act, Regulation (EU) 2023/2854 (the EU Data Act), the provisions of which mostly come into force from September 12, 2025, introduces new rules aimed at improving fair competition in cloud services by making it easier and more cost effective for customers to switch providers. The EU Data Act will also mean that unfair terms in standard form business-to-business data licenses will not be binding, preventing providers from imposing unfair conditions that could hinder portability or create excessive exit costs. These changes are particularly relevant for data center operators and cloud service providers, which will need to review existing contracts and adapt their infrastructure to comply with the EU Data Act’s requirements.

Conclusions: Momentum Meets Uncertainty
Despite the UK’s strong push to establish itself as a global AI and data center hub, significant hurdles remain. Energy constraints, planning difficulties and maintaining investment growth in the competitive global arena all pose challenges to scaling AI infrastructure at the pace required. While initiatives such as AIGZs and regulatory reforms provide positive signals, critical details — including the long-term compute strategy — are yet to be announced. Until then, uncertainty persists around how these policies will translate into actionable change for developers, investors and operators. As the UK navigates this crucial period, maintaining confidence in the sector will require continued government engagement, private sector collaboration and decisive action to remove bottlenecks standing in the way of AI-driven growth.

Strategic Considerations for Businesses
As the UK and EU AI and data center landscapes evolve, businesses and investors should consider the following to successfully leverage these opportunities:

• AIGZs

- For data center operators. Begin evaluating potential AIGZ locations and prepare expressions of interest and applications for government-backed incentives.

- For investors. Identify opportunities to collaborate with developers in AIGZs to benefit from fast-tracked approvals and energy incentives.

• Energy Supply Constraints and AI Energy Council

- For operators and hyperscalers. Conduct energy feasibility studies and engage early with policymakers to secure priority access to clean energy resources.

- For investors. Monitor developments in zonal pricing, as this could significantly impact long-term cost structures—consider engaging with policymakers or industry groups to advocate for zonal pricing incentives, particularly for regions where energy abundance could lower operational costs (e.g., Scotland).

• Planning Reform

- For developers. The UK’s inclusion of data centers in the NSIP regime could streamline the approvals process. Operators and investors should begin assessing whether their projects qualify under NSIP and engage with local authorities early to take advantage of fast-track processes.

- For investors. The forthcoming Planning and Infrastructure Bill may provide additional incentives or hurdles—consider engaging with policymakers or industry groups to shape outcomes favorable to AI infrastructure development.

• Regulatory Landscape and Compliance Preparedness

- For UK data center operators. Begin aligning cybersecurity strategies with the anticipated Cyber Security and Resilience Bill, particularly for providers expected to fall within its expanded scope.

- For EU-based providers. Assess the impact of NIS 2 and the EU Data Act on data governance and contract terms.

• Global Positioning and Competitive Advantage

- For multinational AI infrastructure investors. Compare the UK’s incentives against U.S. (Project Stargate) and French initiatives (€109 billion investment) to determine where long-term capital deployment is most favorable.

For Further Insights: Strategic Perspectives from Pillsbury’s Data Centers Guide
Pillsbury’s Guide to Data Centers (the Guide) offers a wealth of insight across the full spectrum of technical, regulatory and commercial considerations shaping today’s data infrastructure landscape. In light of the UK’s AI infrastructure strategy and the EU’s evolving regulatory environment, we recommend exploring the following deeper trends that intersect directly with the developments outlined in this Client Alert:

• Powering the Future – Nuclear and Behind-the-Meter Innovation. With the UK’s AI Energy Council poised to reshape energy policy for data centers, Pillsbury’s discussion of small modular reactors (SMRs) and nuclear co-location models in the United States provides an important comparative lens. Private-sector-backed energy models emerging in the United States may soon influence UK and EU energy strategy for AI workloads and hyperscale expansion.
• Investment and Ownership Models in Transition. As the UK rolls out AIGZs and the EU states jockey for competitive positioning, operators and investors should watch the growing use of real estate investment trust-backed developments, joint ventures and sale-leaseback arrangements to accelerate builds. The Guide provides a practical breakdown of ownership and funding structures being deployed across the United States and globally.
• Adaptive Reuse – Converting Crypto Mines to Data Centers. The UK’s updated planning framework could open the door to conversions of legacy and crypto-intensive infrastructure. The Guide’s analysis of crypto mine-to-data center conversions highlights critical differences in cooling, energy profiles and uptime standards that developers must navigate.
• Regulatory Headwinds – PFAS, HFCs and Environmental Compliance. As the EU Data Act and UK environmental mandates expand in scope, operators should be aware of emerging regulatory risks tied to cooling agents, fire suppression systems and environmental disclosures, particularly concerning per- and polyfluoroalkyl substances (PFAS) and hydrofluorocarbons (HFCs). The Guide outlines these evolving obligations and their operational implications.
• Contract Complexity in Co-Location and Cloud Deals. With AI infrastructure relying heavily on multitenant data centers, the Guide’s review of service level agreements, security protocols and compliance terms is especially timely as both the UK and EU move toward more prescriptive cybersecurity frameworks (e.g., the UK’s Cyber Security and Resilience Bill and the EU’s NIS 2 Directive).
• Zoning for Innovation – Strategic Infrastructure Siting. While the UK has designated AIGZs to fast-track permitting, the United States is advancing co-location of data centers and zero-emission energy projects on federal lands. The Guide analyzes the U.S. Department of Energy’s land strategy and its implications for long-term siting of energy-intensive compute workloads.

As the UK’s policies continue to evolve, organizations must take proactive steps to secure a competitive edge. Whether assessing investment opportunities in AIGZs, mitigating regulatory risks from evolving cybersecurity requirements or evaluating global AI infrastructure strategies, companies should begin preparing now. Pillsbury’s Data Centers team is well-equipped to provide tailored guidance, helping businesses navigate these shifts, structure compliant operations and optimize investment strategies in the UK, EU and U.S. markets.

Our team delivers to operators, developers, investors, power suppliers and users the strategic advice required to address all aspects of the data center landscape, leveraging experience with real estate, construction, project development and finance, sourcing, cybersecurity, consumer protection and intellectual property issues directly translated to acquiring, developing, financing, powering and operating data centers, as well as protecting the data and privacy interests associated with them. Pillsbury’s Data Centers materials are available here.

The authors would like to thank trainee solicitor Samson Verebes for his contributions to this Client Alert.