The Rapid Rise of Data Centres – Opportunities and Risks for the UK Construction Industry

Global spending on data centres is projected to approach USD $3 trillion by 2028, with the U.S. alone accounting for more than half of that growth[1]. In the UK, there are currently an estimated 477 data centres, with this number set to jump by 100 within the next five years. The largest facility, located in Blyth near Newcastle and costing c.£10 billion, will come just after 2030[2].

This surge in investment and capital expenditure is driven by the increased use of AI, quantum computing and cloud computing. As demand accelerates, so do the contractual and construction challenges that accompany fast-paced, high-value construction.

The rapid change of data centres

The concept of data centres has evolved over the last decade. Artificial intelligence is not only increasing data usage but redefining how we design and build physical infrastructures. AI-driven data centres require significantly higher power requirements, high-density server racks and cutting-edge cooling systems, far beyond what traditional data centres were built to handle. These facilities must be equipped to support enormous power demands, constant real-time operations, technologies such as liquid cooling, uninterruptible power supplies and secure access control[3].

Construction and contractual challenges

Data centre projects differ markedly from traditional commercial construction. They combine heavy MEP (mechanical, electrical and plumbing) requirements, ultra-tight programme expectations and a rapidly shifting technological specification. Furthermore, data centre construction is highly subject to political and economic conditions which may cause the key ultimate clients to change business plans and suspend projects. This combination creates ground for contractual risk and future disputes if not managed proactively.

1. Power issues – The chief executive of the National Grid, John Pettigrew, has said that data centre power usage will increase six-fold in the next decade[4]. To prepare for this, the Government is creating new AI Growth Zones (“AIGZ”), with the most recent zone in North Wales near the location of the first Small Modular Reactors[5]. The Government may be adopting a strategy similar to Microsoft’s approach at Three Mile Island in the U.S. where they plan to purchase energy specifically for its data centres.[6]
2. Specialist supply chain dependency – Supply chains constraints continue to be a limiting factor in data centre growth. With companies such as Taiwan Semiconductor Manufacturing Company (“TSMC”) dominating over 50% of the world’s semiconductor supply and there being such high demand, there is increased focus on if they will be able to satisfy demand.
3. Programme pressure – Data centre clients, often hyperscalers or major tech firms, commonly require rapid delivery to meet digital demand. Programmes are typically compressed, leaving limited float and minimal tolerance for delay. Any disruption to specialist supply chains, commissioning or integration can quickly become a critical-path issue.
4. Complex and evolving design – Projects often rely on intricate integration of power, cooling, redundancy and security systems. Specifications frequently evolve during the design and procurement phases as the end-user’s technology stack changes. This creates significant risk around design responsibility, scope definition and change management.

Risk management: practical steps for project teams

Due to the high value, high risk and large constructional challenges, the contracts for building data centres can be complex. There is a need for early engagement and clear drafting to ensure that all aspects of delay, variations, and performance guarantees are dealt with and understood from the outset. To mitigate the risks, it is important to focus on:

1. Clear and early specification – Where specifications may evolve, this should be expressly reflected in contract mechanisms for change, programme movement and price adjustment.
2. Robust change control – Given the pace in change, a robust variation process is essential. Record-keeping, contemporaneous evidence and clear gateways for approving changes can significantly reduce later contention.
3. Realistic programming – All parties benefit from programmes that recognise supply chain lead times, commissioning complexity and interface dependencies. Unrealistic programming almost always leads to disputes.
4. Delay, disruption and suspension – Given the strict timescales and the risk of projects being put on hold, it is important that contractual obligations relating to timescales are considered carefully with entitlements to an extension of time due to delays outside the supplier’s control. Rights to suspend and terminate and the impact of the same on the contract sum should also be considered.
5. Dispute avoidance and early resolution – Tools such as early warning procedures, adjudication, expert determination and early neutral evaluation can prevent issues from escalating into full disputes which threaten project delivery.

Beale & Co have extensive experience acting in data centre related disputes, including adjudication and arbitration, arising from delay, MEP integration issues, power and resilience requirements, design responsibilities, and contract administration. We also help with corporate, commercial and regulatory matters in relation to data centres and those who own and operate them, including procurement, competition and health and safety.

If you have any questions relating to the information discussed in this article, or would like more information on how we can assist with your data centre project, please contact Nicholas Smith and Joseph Roberts.

[1] data center debt surge 2025 ai infrastructure boom: Data center debt skyrockets 112% — $25 billion issued as AI boom fuels borrowing frenzy – The Economic Times

[2] Data centres to be expanded across UK as concerns mount – BBC News

[3] The UK’s Data Centre Boom: Building the Backbone of a Digital Nation | Visibuild

[4] Data Centre Construction Projects: The Surge in the UK – Barbour ABI

[5] UK government vows to fast-track AI growth zone planning and energy access | Computer Weekly

[6] US Approves $1B Loan to Restart Three Mile Island, as Microsoft Data Centers Drive Demand