The data centre sector has the potential to become one of the fastest growing industries in the UK, according to a new analysis published by technology trade association techUK today.
According to the Foundations of the Future report, commissioned by techUK and developed by Henham Strategy, data centres are currently contributing £4.7 billion in Gross Value Added (GVA) annually to the UK economy.
The report also shows that the sector has created 43,500 jobs across the UK economy, contributing £640m in tax revenue to the exchequer.
However, as technology continues to evolve, with significant advancements in AI and emerging technologies, the demand for data centres is set to increase at a much faster rate than it ever has before, with projections of future growth at between 10-20% a year.
The report suggests that if the UK can meet the projected growth of the data centres sector above its recent growth rate of 10% to 15% a year, this could have a transformative impact on the sector and wider UK economy by 2035.
The report estimates the construction and operation of data centres will contribute an additional £44b in GVA between 2025 and 2035.
Further, it should boost employment, with 40,200 additional jobs directly employed in data centre operational roles by the year 2035, with 18,200 additional jobs directly employed in data centre construction roles over the period 2025-35.
techUK also estimates that the infrastructure will create a tax boost of £9.7bn.
“Data centres are the backbone of the digital economy; without them our transport, energy and wider economy couldn’t function,” Matthew Evans, director of Markets and COO at techUK, said.
“And with continued AI advances, the importance of data centres to unlocking tech-led growth is only accelerating. Despite the critical role data centres play in supporting sustainable economic growth, their potential is far from fully realised. With the right policy support and collaboration between industry and government, the sector is poised to drive further innovation and enable digital transformation across all sectors of the economy across the country.”
Key Recommendations
The report sets out several key policy areas where government action can further enable the growth of the data centre sector and address existing challenges.
Energy
Data centres require large amounts of energy, and the sector faces challenges in securing timely and affordable access to clean energy. techUK highlights the need for government support in improving grid connections, reforming queue processes, and enabling access to renewable energy through initiatives like Power Purchase Agreements (PPAs). Additionally, the development of on-site renewable energy sources such as geothermal or small modular reactors (SMRs) can help ensure the long-term sustainability of data centres.
Sustainability
Despite a doubling of data centre workloads since 2015, electricity demand has remained flat due to the industry’s ongoing efficiency improvements. The report recommends greater integration of data centres into district heat networks, the adoption of sustainability reporting standards, and continued focus on resource optimisation to support the sector’s journey towards net-zero emissions.
Planning Reforms
The UK’s planning system needs reform to accelerate data centre development. The report calls for the introduction of a National Policy Statement for data centres, streamlined planning processes through the Nationally Significant Infrastructure Projects (NSIP) regime, and improved training for local planning authorities to ensure speedy and consistent decision-making. These changes will help ensure that data centres can be built quickly and efficiently, contributing to local and national economic growth.
Skills Development
Data centres offer high-paying, stable jobs, but the industry faces challenges in attracting skilled workers. The report encourages reforms to the apprenticeship levy and greater promotion of career pathways in the sector. Initiatives such as the National Data Centres Academy and local partnerships with colleges are key to addressing skills shortages and fostering the next generation of talent.
Collaboration
While the industry welcomes the role that DSIT has been playing in coordinating with other government departments, the sector would encourage further coordination to ensure any further policy developments across areas of government remain coherent and consistent in their approach. In the past, data centres were often caught by default in numerous regulations. It is therefore imperative to achieve growth objectives that various policies do not diminish these aims, and support DBT/OFI and DSIT in their efforts to promote the industry in the UK internationally and its competitiveness.
“Data centres are critical to powering the technology that drives our modern economy. This government has already begun to give a boost to the sector by giving them Critical National Infrastructure status which will strengthen protections against events like cyber-attacks.
“As these findings show, if government and industry work together to tackle the challenges and harness the opportunities the sector offers, we can create thousands of jobs and drive prosperity across all corners of the country. We have already seen the sector respond with over £25 billion of private investment committed in recent months.”
Nick King, Managing Director at Henham Strategy said: “The essential role that data centres play in our modern economy is underappreciated by the public and politicians alike.
“Not only do they unlock the vast array of technological services we all rely on every day but they’re big business – bringing investment, jobs and tax revenues at both a local and national level. This report aims to shine a light on both their current impact but also their future potential. If the UK can present itself as an obvious market for international investors over the next decade, we all stand to gain.”
Source: DIGIT