TL;DR

The government is examining a “data centre covenant” under which developers would pay into host communities or hit energy-use targets, and in return win quicker planning decisions or grid connections. City AM reported the idea on 27 October, crediting the Financial Times with the first report, as proposals were being looked at ahead of the Budget on Wednesday 28 October. Final terms have not been agreed.

The trade on offer

City AM says ministers aim for six gigawatts of computing capacity in Britain by 2030, three times the current level, a figure the government’s July 2025 compute roadmap presents as a forecast of the AI-capable data centre capacity the UK will need, while the electricity network is already under strain. The covenant would tie priority grid access to commitments from developers.

According to City AM, the planning framework is running late. Large data centres now fall under the NSIP regime for nationally significant infrastructure, but the National Policy Statement meant to guide those decisions has not appeared. Ministers promised in November 2025 to consult on it within three months. AI minister Kanishka Narayan has since told Parliament it will come “in due course”.

The grid backlog is the pressure point. Ofgem figures cited by City AM show the connection queue roughly tripling to 125GW by June 2025, up from 41GW seven months earlier, with data centres behind at least 80GW. In the week before the report, City AM says, Microsoft walked away from what would have been Britain’s largest AI data centre, at Loughton in Essex, because grid limits meant it could not get power in time.

Community pushback is growing. In north Devon, Xlinks is planning a 1.5GW AI data centre near Torrington, inside a Unesco biosphere. The BBC reported that about 100 people protested before a Torridge District Council meeting on Monday 26 October, where a nine-year-old asked councillors to “fight for our homes, community and landscape”. Campaigners obtained FOI disclosures showing council officers had met the developer in March 2025. No application has been submitted, and Xlinks says its plans are “at a relatively early stage”. We covered the earlier protest in September.

City AM also cites a Spotlight on Corruption investigation finding that officials met 137 businesses while shaping the AI Growth Zones policy, against two community groups.

Looking Forward

Councils in England hosting AI Growth Zones are due to keep their extra business rates under rules taking effect from April 2027. In our view, a covenant would move community benefit from a sweetener to a condition of access, which could help sites like Torrington win consent but adds cost and negotiation for developers. Whether it features in the 28 October Budget, or waits for the overdue policy statement, will show how firmly ministers intend to tie the two together.

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