AI Growth Zones In The UK To Promote AI Data Centre Investment

On 13 January 2025, UK Prime Minister Keir Starmer stated his ambition to make the UK an "AI superpower." He indicated that AI would be placed at the core of the country's economic growth plan and announced the introduction of regulations designed to promote growth and innovation. On the same day, the UK government published the AI Opportunities Action Plan (the Action Plan), which declared its intention to accelerate the construction of AI data centres through the establishment of AI Growth Zones (AIGZs).

The Department for Science Innovation and Technology (DSIT) took a further step towards delivery of AIGZs on 13 November 2025 by publishing its Delivering AI Growth Zones policy paper (the Paper), setting out a package of measures designed to support the AI superpower vision.

We explore the proposed policy changes below, giving an overview of the key elements, application requirements, and current status of AIGZs, and considering their implications for AI data centre investment in the UK.

1. Policy Overview

Outline and Objectives of AIGZs

AIGZs are designated areas established by the UK government with the aim of enabling investors to make swift and confident investments in AI data centres. Specifically, AIGZs seek to overcome the major barriers to such investments—namely, slow and inconsistent planning processes and delays in power supply—and to reduce the operating costs of AI data centres.

Expected Policy Outcomes

The UK government expects AIGZs to deliver the following benefits:

• Reduce the time required for power supply by up to five years
• Save up to £80 million per year in electricity costs for a 500MW-scale data centre
• Unlock up to £100 billion in new investment
• Create more than 10,000 new jobs

Main Elements of the Policy

The main elements envisioned for the specific policy content of AIGZs, set out in the Paper, are as follows:

Accelerating Grid Connections

DSIT considers delays in connections to the electricity grid to be the single biggest obstacle for establishing AIGZs. Whilst the ongoing existing connections reforms (see our article for more details) are expected to accelerate grid connections for many projects, the government sets out its intention in the Paper to go further in removing speculative demand from the grid connections queue, ensuring only "the most strategic and credible projects are taken forward".

To accelerate grid connections, three main approaches are to be introduced: prioritising AIGZs through the reservation and reallocation of grid capacity and enabling self-build:

• Reservation - The new reservation mechanism will allow capacity to be held at a specific physical connection point for future AIGZ projects, amongst other strategically important projects (i.e. a proposed data centre in an AIGZ could make use of grid capacity reserved for the relevant AIGZ, with an earlier connection date, rather than joining the back of the connections queue when it makes its connection application).
• Reallocation - The reallocation mechanism gives priority access to freed-up capacity when another project exits the queue (i.e. a data centre in an AIGZ could be allowed to leapfrog other earlier connection applications).

The Paper states the government's intention to apply new powers in the Planning and Infrastructure Bill (which, as at the date of this article, is in the final Parliamentary stages) to prioritise projects identified by the government as strategically important. This could result in demand projects no longer being deemed to be "needed", with projects having to align with the government's strategic plans to obtain a firm connection offer (as is now typically the case for generation connections). It is not yet clear which demand projects, other than AIGZ projects, would be considered "needed".

Assuming that any future reforms to the Gate 2 criteria will only apply to future connection applications and not impact projects which receive connection offers in the Gate 2 to Whole Queue, the reservation and reallocation mechanisms in the Paper will be needed to enable priority AIGZ projects to be accelerated. The new mechanisms could be implemented through the government using its Planning and Infrastructure Bill powers to direct that the National Energy System Operator's (NESO) existing powers to reserve capacity and to prioritise connection applications for certain projects (as implemented under NESO's connections reform methodologies) are extended to AIGZ projects.

DSIT also states that it is setting out a strategic plan to remove speculative demand projects in the connections queue. It not yet clear the extent to which this will go beyond the existing queue management process, which allows for projects not progressing fast enough to be removed from the connections queue, but this approach aligns with Ofgem's guidance and NESO's Call for Input on the demand queue, both issued earlier in November 2025. In its guidance, Ofgem states that options being considered include whether demand-specific maturity metrics could be applied to queue management and introduction of a progression commitment fee to demand projects. It is also not yet clear the extent to which any changes will apply to embedded demand projects with a grid connection to a local distribution system (as opposed to a direct, transmission-level connection).

• Self-build - Government and Ofgem are also exploring how AIGZ developers may construct their own high-voltage lines to facilitate earlier connection dates. Different models will be explored, whereby developers can either build and then hand over operations to the network operator or keep ownership. Although we note that Ofgem took a cautious approach to enabling high-voltage self-build in its guidance and has previously rejected a proposal to remove the existing 2km limit for self-build of transmission assets, requiring further consideration of risks.

Connections Accelerator Service - Data centre projects in AIGZs will also benefit from the government's Connections Accelerator Service, with a pilot being launched in 2025, to provide enhanced engineering support to find creative solutions to connection delays.

Bringing Down Energy Prices

The government has committed to developing a targeted pricing support mechanism providing energy price discounts to data centres in specific regions where benefits can be obtained from reducing grid constraints, such as in Scotland, Cumbria, and the North East. The Paper notes that, for example, in Scotland, wind power generation can exceed the grid's capacity to absorb it, and harnessing this surplus could help reduce overall electricity costs across the UK. However, the Paper does not clarify whether discounts will apply to entire regions or only certain areas of the designated regions, nor whether additional regions may be designated in the future. Further announcements from the government are therefore awaited.

Reducing Planning Barriers

The Paper outlines a number of proposed interventions to seek to improve the speed and consistency of the planning process and decision-making for AI data centres. Key measures include:

• Revising the National Planning Policy Framework to give significant weight to AIGZs and the national need for such infrastructure.
• Introducing a new "National Policy Statement (NPS) for Data Centres" for 'Nationally Significant Data Centre Projects' to provide clarity and certainty for developers on the needs case for large-scale AI data centre schemes (the threshold for which will be outlined in the NPS, and which will subsequently be determined by central government through the Nationally Significant Infrastructure Projects (NSIP) consenting route under the Planning Act 2008, rather than the default determination by the relevant local planning authority under the Town and Country Planning Act 1990).
• Consideration is also being given to designating such large-scale AI Data Centre NSIPs as "Critical National Priority" infrastructure, further strengthening their stated need case, and also whether additional measures can be introduced to the NSIP planning process to speed up the consenting timeline.
• £4.5 million of funding to create a national team of AI data centre planning experts to provide a combination of direct advice and grant funding to Local Planning Authorities considering AI data centre applications.
• Use of existing safeguarding powers to protect land for AIGZs, where appropriate, on a case-by-case basis to ensure sites remain available for future expansion by proactively preventing conflicting development.
• Updating the Consultation Direction, to ensure the government can call in applications that would otherwise be determined by local planning authorities and make decisions at a national level.

The clear intention of the measures is to ensure that it is harder for local authorities to refuse planning applications for AI data centres and/or otherwise offer the ability for central government to take such decisions out of the hands of local government where necessary. The principle and intent of such measures will be welcomed by developers/industry; however, their practical effect will depend upon the speed by which they are implemented, with a prior consultation on the proposed policy measures promised in the next 3 months.

2. Application Requirements

Regional and local authorities, as well as industry (including data centres and energy firms) can apply for an area to become an AIGZ. The main requirements for applying are as follows:

A noteworthy point is that, under the category of local impact, sites located near land suitable for the development of low-carbon power generation and energy storage infrastructure will be viewed favourably. Therefore, from the perspective of increasing the likelihood of an application being approved, it is desirable for operators to establish AIGZs near renewable energy plants, nuclear power stations, or other low-carbon power generation facilities, as well as energy storage infrastructure. An example of this is the recently designated AIGZ in North Wales, which is adjacent to small modular reactors.

Among the above application requirements, those with specified deadlines (for example, "sites must demonstrate access to at least 500MW of power capacity by 2030" or "sites must have a minimum of 100 acres of land available by 2028") may possibly be allowed to be pushed back for applications submitted after June 1, given that the original application deadline for AIGZs in May 2025 has already passed (although applications themselves can still be submitted after June 1). However, this point has not been clarified in the UK government's published materials. Further updates are awaited.

3. Current Status of the Policy

Eleven months after the announcement of the AI Opportunities Action Plan on January 13, 2025, four locations have already been designated as AIGZs, including Oxfordshire, Blyth Cobalt Park in the North East of England, and North and South Wales, and further new projects are expected to be announced in the near future. For example, reports indicate that companies such as OpenAI, Nvidia, and Nscale are participating in the Cobalt Park project. Only the Cobalt Park AIGZ is in an area potentially eligible for the pricing support mechanism as set out in the Paper.

If you would like to understand more about what AIGZs means for you or your business, please do not hesitate to get in touch.

Junya Ohashi, a lawyer seconded from Nishimura & Asahi in Japan, contributed to the writing of this article.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.