Powering the Future: new Government paper sets out a sustainable and resilient data centre planning policy

Introduction:  

On 26 August 2025, the UK Government released their new research paper “Data Centres: Planning Policy, Sustainability and Resilience’ (the “Paper”) (here) which provides a comprehensive overview of the data centre sector, alongside exploring the critical role of data centres in areas such as digital infrastructure, economic development and enabling the deployment of AI technologies.

The Paper follows the September 2024 designation of data centres as part of the UK’s Critical National Infrastructure (“CNI”), a move with significant planning and regulatory implications (Data Centres officially designated as “Critical National Infrastructure).

Key findings:

The Role and Types of Data Centres:

The Paper identifies that data centres are essential facilities that house IT equipment for processing, storing, and sharing digital data. They are the backbone of the digital economy, supporting everything from everyday online activities to the development of dynamic AI technologies. The UK government has recognised their importance by designating data centres as CNI, emphasising their growing importance.

The Paper also distinguishes AI data centres (specialised for high-performance computing needs) and edge data centres (smaller facilities located close to end users to minimise latency), both of which have unique planning and locational requirements.

The UK had approximately 450 data centres in 2024, with a total capacity of around 1.6 GW, expected to rise to between 3.3 GW and 6.3 GW by 2030. Whilst most data centres are concentrated in Greater London, new hubs are emerging in Manchester and South Wales.

The economic impact of Data Centres:

The Paper identified the following economic impacts:

• It is estimated that UK data centres have an annual gross valued added of £4.7 billion which has been contributed to UK economy.
• As data centres are highly automated facilities, the number of jobs they can create is modest, with current estimates stating that UK data centres support around 43,500 full time equivalent jobs.
• Jobs will also be created in the construction phase and generate indirect employment through its supply chain.
• Data centres also support other sectors that benefit from data proceedings and storage services, including AI, cloud computing and financial services. For this reason, data centres are for this reason a core part of the government’s proposed AI Growth Zones programme, through which it aims to establish clusters of AI research and innovation.

Planning policy:

The Paper identified the following key planning policies for data centres:

• Alongside the designation of data centres as CNI, the UK Government also updated the National Planning Policy Framework (“NPPF”) in December 2024 following consultation. The NPPF now requires local authorities to consider the need for data centres when setting local policies and making planning decisions. In addition, LPAs should “recognise and address the specific locational requirements of different sectors”( Revised NPPF Boosts Datacentres for UK Economic Growth)
• Additionally, AI Growth Zones will have fast-track planning and infrastructure support for AI data centres, encouraging the acceleration of their growth. AGZs would have a streamlined planning approval process and accelerated access to “clean power”.
• Data centres will now also be able to opt into the Nationally Significant Infrastructure Projects (“NSIP”) regime, meaning that planning decisions will be made instead by the Secretary of State, allowing for a streamlined application process for data centres.
• The Government have also set out to accelerate the delivery of high quality infrastructure, which will include data centres, intending to address these issues through the passage of the Planning and Infrastructure Bill 2024-25.

Sustainability – energy consumption:

Data centres currently consume around 2.5% of the UK’s electricity with ever increasing demand expected to rise four-fold by 2030. This has raised concerns about the energy sustainability and grid capacity needed to sustain data centre growth, which is being accelerated by AI.

The Paper identified energy challenges faced by data centres and set out the government’s proposed solutions:

• The sector faces high energy costs compared to other countries, and grid connection delays are a significant bottleneck to progress. However, major operators have committed to ambitious decarbonization targets, supporting renewable energy projects through power purchase agreements and exploring nuclear power.
• To tackle the problem of limited grid capacity and the length of time to obtain a connection, the UK government has reformed the grid connection process to prioritise clean energy projects that are ready to use grid capacity. Projects that prioritise clean energy which can demonstrate that they are both ‘ready’ and ‘needed’ will go into a priority queue called Gate 2.
• The government has also, in its recently published Modern Industrial Strategy, committed to introducing a scheme to reduce energy costs for businesses. The scheme is set to launch in 2027, although it is unclear whether data centres will be eligible for support.
• Separately, the government has set up the AI Energy Council to facilitate collaboration between the AI and energy sectors, which met for the first time in April 2025. Its aims are to: provide expert insight into the energy needs of AI and look at where to best locate AI data centres to ensure the growth of AI and data centres in the UK is done in a way that supports the government’s clean power and longer-term decarbonization goals.

Sustainability – water consumption:

Cooling is a major operational requirement for data centres and depending upon the size and the cooling method used, vast amounts may be used. Alongside this there is limited transparency and data on water consumption, leading to concerns about the impact of data centers on local water resources.

The Paper identified the following challenges and solutions to tackle the water consumption challenges:

• The government is working with industry to improve reporting and efficiency and encouraging the use of non-potable water sources, and the embedding of water efficiency or water use in data centre design. Industry is being encouraged to contact their proposed water and wastewater supplier early in the planning process to understand and plan for any potential water restriction
• In its National Framework for Water Resources the Environment Agency (“EA”) said that reliable data on data centres’ water use was “vital for long term planning” and that “without it we are unable to accurately model or predict future water needs”. The EA noted that despite the data collection work it was undertaking with techUK it was still “experiencing barriers in gaining information about water consumption”.
• The Royal Academy of Engineering called on the government to mandate water consumption reporting to address this data gap and drive efficiency. The government has said that it is working with the sector to “identify opportunities to improve reporting”.
• Applications for AI Growth Zones must be accompanied by a statement from the local water supplier that the site has sufficient access to water. The first AI Growth Zone will be at the UK Atomic Energy Authority’s (UKAEA) headquarters in Culham, Oxfordshire, which is in a ‘seriously water stressed’ area.

Resilience and Regulation:

As data centres become more critical to the modern UK economy, their resilience to cyberattacks, power outages, and climate risks is paramount.

The Paper identifies the following steps taken by the government/industry to enhance resilience:

• The introduction of new cybersecurity standards under the forthcoming Cyber Resilience Bill, which will bring data centres into the scope of the Network and Information Systems (NIS) Regulations. The government has also proposed to use the forthcoming bill to impose statutory cybersecurity duties on data centres.
• Industry standards (such as EN 50600 and ISO 27001) are widely adopted, but the government is considering further regulation to ensure consistent application and to address systemic risks.
• Data centres may also be certified against green building assessment frameworks, such as BREEAM (Building Research Establishment Environmental Assessment Method). The BREEAM framework assesses a facility’s resilience to climate change-related risk
• Following CNI designation, there will be the creation of a dedicated team of senior officials who will “monitor and anticipate potential threats, provide prioritised access to security agencies including the National Cyber Security Centre, and coordinate access to emergency services should an incident occur”. In addition, CNI sites are exempt from emergency planned power cuts, which electricity grid operators implement if there is a risk of energy demand outstripping supply.295 However, designation as CNI does not, in itself, introduce any new requirements on data centres.
• Service level agreements are a commercial incentive to improve resilience, with techUK stating that certification against the standards mentioned above is already a requirement in most data centre customer contracts.
• The National Protective Security Agency and National Cyber Security Centre (“NCSC”) have published joint guidance for data centre customers. The guidance contains some key questions customers should ask about data centre security, including “Can the data centre demonstrate that they have diverse power supply and backup power options?”.

Conclusion:

Data centres are at the heart of the UK’s digital infrastructure, enabling economic growth, technological innovation, and the deployment of AI. However, the rapid growth of the sector also presents increased challenges to sustainability and resilience. This Paper presents the UK’s government’s response to these issues, with a series of policy reforms to facilitate data centre development, support sustainability, and strengthen resilience.

The general conclusion is that while data centres are indispensable to the UK’s digital future, their continued expansion must be carefully managed to balance economic benefits with environmental sustainability and national security.

This article was co-authored by Sophie Lee, Solicitor Apprentice at CMS.