High energy costs and policy hurdles cited as reasons to pull back
Plans for a major AI investment in the UK have been put on hold by OpenAI, in a setback to the government’s ambitions to position the country as a global AI leader.
The proposed “Stargate UK” initiative formed part of a broader transatlantic agreement announced last year, in which American technology firms signalled intentions to invest billions into Britain’s digital infrastructure.
The project aimed to expand domestic computing capacity and support the development of so-called “sovereign compute” – systems allowing sensitive data to be processed within national borders.
However, OpenAI, which is planning on an IPO this year, has now paused its involvement, citing high energy costs and an uncertain regulatory environment.
The company said it would revisit the project when “the right conditions” for long-term infrastructure investment are in place.
“We see huge potential for the UK’s AI future. London is home to our largest international research hub, and we support the government’s ambition to be an AI leader,” an OpenAI spokesperson said.
“AI compute is foundational to that goal – we continue to explore Stargate UK and will move forward when the right conditions such as regulation and the cost of energy enable long-term infrastructure investment,” they added.
The decision represents a challenge for the UK government, which has placed AI and datacentre expansion at the heart of its economic growth strategy.
Victoria Collins MP, the Liberal Democrat spokesperson for science, innovation and technology, described the pause as a “wake-up call”, urging ministers to address energy pricing and infrastructure gaps.
Meanwhile, Labour MP Clive Lewis said the situation exposed deeper weaknesses in the government’s industrial strategy, accusing it of prioritising announcements over delivery.
From the opposition benches, Conservative Ben Spencer pointed to investor concerns around costs and regulatory clarity, arguing that the UK risks losing competitiveness if underlying issues are not addressed.
“When global firms cite high energy costs and regulatory uncertainty as reasons to walk away, it tells you everything about the direction of travel,” he noted.
Questions over delivery
The Stargate project relied in part on infrastructure being developed by Nscale, a relatively new firm tasked with building advanced datacentres and a planned supercomputer in Essex.
That facility, initially expected to be operational by 2026, has yet to move beyond early construction stages.
Industry observers say such delays, combined with rising energy prices, may have contributed to OpenAI’s decision.
Experts have also highlighted ongoing uncertainty around copyright and AI training rules in the UK, while others have pointed out that OpenAI is planning to go public this year with no signs of profitability.
Amanda Brock, CEO of OpenUK, said prolonged indecision on how AI systems can use copyrighted material has created a “lose-lose” situation, deterring both technology firms and content creators.
“Whether their decision is really as a result of the UK’s copyright regime or that’s a convenient excuse remains to be seen. The dithering and apparent inability to make a decision on copyright and AI training, text and data mining, despite what is now several years of consultation is not painting the UK’s tech regulatory capabilities in a good light.”
Uncertain outlook
For now, the future of Stargate UK is unclear. But officials say they remain committed to working with OpenAI and other firms to strengthen domestic computing capacity and ensure the UK remains an attractive destination for AI development.
A government spokesperson said: “Our AI sector has attracted more than £100 billion in private investment since the government took office, with the sector growing 23 times faster than the wider economy last year. That is delivering the jobs and opportunities hard-working people deserve.”