The scale of investment is unprecedented but does it add up to a recipe for jobs, skills and sustained regional growth?
In March, the UK’s biggest data centre scheme – the Elsham Tech Park near Scunthorpe – gained outline approval. The proposed centre would deliver more than 1.5 million sq m of hyperscale floorspace across 15 data halls and cost around £7.5bn, making it one of the most ambitious digital infrastructure projects planned in the UK.
The construction industry naturally sees schemes like this as an opportunity. The same is true of logistics, with parks and distribution hubs attracting billions of pounds of investment and creating demand for construction.
At a time when our economy has all the growth and vibrancy of a British lawn wilting under a hosepipe ban, and governments are struggling to deliver infrastructure, spending more time on soundbites than solutions, perhaps we should celebrate this sudden influx of private-sector investment.
Sugar rush or long-term solution?
But there is a bigger question. Are data centres and logistics hubs going to be the saviours of the industry, or are they simply a sugar rush that can’t replace the long-term investment needed to generate sustainable economic growth?
There is a strong argument for the former now that data is fundamental economic infrastructure. AI, cloud computing and digital services require enormous computing capacity, and the UK is well placed to benefit. These facilities bring investment and construction activity.
Logistics is equally fundamental. Britain remains a major consumer economy, meaning goods still need to move efficiently. Logistics parks support supply chains, as well as providing employment and investment – but there’s a catch.
A £7.5bn data centre may be transformational for a site, yet permanent jobs can be modest compared with the investment. Logistics parks may create more employment, but automation is rapidly changing that work, with robotics, autonomous vehicles and AI-driven systems reducing labour intensity.
Neither sector, on its own, creates the ecosystem of skills, innovation and productivity that underpins sustained regional growth.
There is another warning sign to be mindful of, too. In the US, enthusiasm for data centres is increasingly being matched by political and community resistance. A Gallup poll found seven in 10 Americans opposed AI data centres being built in their local area. In July, New York became the first US state to pause approvals for new data centres for up to a year to give the state time to develop a regulatory framework amid concerns about electricity prices, water consumption and environmental impacts.
One analysis identified at least $170bn of announced US AI data centre investment that had stalled, been withdrawn or cancelled following community opposition.
It would be a mistake, then, to assume the current data centre pipeline represents an endlessly expanding market. AI investment may continue, but political headwinds could quickly change the economics. For UK contractors, consultants, developers and suppliers, this is potentially a rich vein of work but one I would argue we should not become overreliant upon.
Then there’s the associated infrastructure. Data centres consume enormous amounts of electricity, while logistics parks increase demand on roads. If private investment races ahead while public infrastructure falls behind, the economic win could well become a planning headache.
This is where the new Andy Burnham-led government needs to be clearer about the UK’s economic geography. For years we have heard about levelling up, growth corridors, new towns and major infrastructure programmes. Too often, making announcements has proved far easier than delivery. In that vacuum, the market naturally gravitates towards projects that make commercial sense now.
There’s nothing wrong with that, but a country can’t build its way to long-term prosperity just by providing ever-larger sheds, greater numbers of server farms and more sprawling distribution centres.
Long-term plan still missing
The challenge is to use these developments as anchors for something bigger. A data centre should help justify investment in energy, grid capacity, skills and digital infrastructure. A logistics hub should connect to housing, transport, employment and manufacturing. Doing that requires government to provide something the private sector cannot – a long-term plan.
The UK doesn’t lack capital or demand. What it often lacks is the confidence that infrastructure, planning, energy networks and the political environment will still work in 10 or 20 years. That uncertainty comes at a cost.
So, perhaps the question is not whether data centres and logistics hubs are intrinsically good or bad for the built environment (they are clearly good for an industry that needs investment and activity). The more important question is what we do with them.
If these projects become the foundation for broader infrastructure investment and regional regeneration programmes, then they could prove enormously valuable. If they simply fill the gap left by government indecision and weak growth, perhaps we should be more cautious about declaring victory.
The built environment has always reflected the economy it serves. The danger is that we become so grateful for any major project that we stop asking whether it is helping to build the economy we actually want. Data centres and logistics hubs may well be part of the answer, but they can’t be the only one.
Richard Steer is chair of Gleeds Worldwide and an honorary Fellow of the Chartered Institute of Building