OpenAI has put its ambitious £31 billion Stargate UK data centre project on hold, citing the country’s high energy costs and regulatory landscape.

The news was first reported by POLITICO, with a spokesperson telling the outlet that it will only proceed "when the right conditions such as regulation and the cost of energy enable long-term infrastructure investment."

Announced in September alongside US President Donald Trump's state visit to Britain, the project was presented by Prime Minister Keir Starmer and Technology Secretary Liz Kendall as a significant vote of confidence in the UK's AI ambitions. OpenAI had committed to exploring the lease of up to 8,000 advanced Nvidia chips from data centre firm Nscale, with sites including Cobalt Park in the North East of England, a government-designated AI Growth Zone.

The pause deals a setback to the government's efforts to position Britain as a global AI hub. OpenAI cited predictable copyright rules as one factor in its investment decisions; the government last month abandoned earlier proposals that would have allowed AI companies to train on copyrighted material unless rights holders opted out – a reversal that drew widespread criticism from the technology industry.

A Department for Science, Innovation and Technology spokesperson said the government was "continuing to work with OpenAI and other leading AI companies to strengthen UK compute capacity." OpenAI said it "see[s] huge potential for the UK's AI future" and that London remains its largest research hub outside the United States.

Andy Lawrence at the Uptime Institute told the Guardian that OpenAI, Nscale, and the government each had reasons not to proceed, pointing to government concerns about energy and costs, OpenAI's worries about competition, and Nscale's difficulties securing expertise and equipment. "The overall demand for all of this wasn't, and still isn't apparent. The whole sense of urgency has dissipated," he said.

Sam Richards, chief executive of the pro-growth campaign group Britain Remade, warned that the decision carried broader implications. "OpenAI halting their flagship British investment is a stark warning: Britain is becoming too expensive to build in," he told the Guardian. "When global tech firms cite sky-high energy costs and slow regulation, ministers must pay attention and meaningfully act."

The UK's industrial electricity prices were already the highest in Europe before recent geopolitical tensions pushed energy costs higher still. Ministers have previously acknowledged that the country is unlikely to become a leading destination for the large data centres required to train frontier AI models.

The Stargate UK pause is not the only AI infrastructure project facing delays. A separate plan by Microsoft and Nscale to build the UK's largest data centre in Essex has been pushed back from 2026 to the second quarter of 2027. Nscale said the delay would allow incorporation of newer Nvidia chips, though the site has yet to receive full planning permission.

AI Minister Kanishka Narayan defended the government's record in an interview with POLITICO's Westminster Insider podcast last month. "Of course, when you have the biggest investments in the history of infrastructure in parts of Britain, you're not going to get the building up and running on day one," he said.

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