Navigating the Future: Top Challenges for UK Data Centres in 2025

As we look towards 2025, the UK’s data centre industry is undergoing unprecedented transformation. Rapid technological advancements, sustainability demands and shifting business strategies are reshaping the sector. From addressing the rise of AI to adapting to stricter regulations, as well as stiff competition from European counterparts, UK providers are facing challenges that demand both innovation and collaboration. Taking into account these critical challenges, Stewart Laing, founder and CEO at Asanti Data Centres explores the key areas set to dominate the UK data centre agenda in the coming year.

Scaling regionally to bridge the digital divide

While the UK boasts over 500 data centres, their heavy concentration in the South East leaves much of the country underserved. Regional growth is essential to closing this gap, providing low-latency solutions and enabling businesses in the North, Scotland and other regions to scale their operations. However, a significant barrier to this expansion is the lack of available fibre and power connections in these areas. To meet the diverse business needs across the UK, data centres must not only plan but actively begin to extend their infrastructure. For this to be viable, the Government must take decisive action to improve connectivity and power availability, enabling the decentralisation of the digital economy.

AI demands: reality vs. hype

While artificial intelligence (AI) is revolutionising many industries, the rapid influx of speculative investment in AI ready data centres may be overestimating demand. There are echoes of the dotcom bubble here, where inflated expectations outpaced actual utility. AI applications are driving innovation, but there is a danger that we are overbuilding infrastructure for presumptive use cases. In reality, the high-density compute needs of AI (e.g., 100–150 kW racks) are primarily associated with finite modelling periods (weeks to months). This short-term demand contrasts sharply with the long-term contracts required for the sustainable operation of data centre infrastructure.

Public cloud repatriation: a shift towards colocation

The reign of the public cloud ‘cloud-first’ solutions to hosting IT infrastructure is waning. Asanti’s recent research shows that a staggering 91% of businesses are repatriating all or some applications to on-premise or colocation data centres. The reasons? High costs, compliance, security and a lack of control have all been cited as major concerns. There has been a lack of impartial advice, leading companies to make ill-informed decisions during their cloud adoption journey, driven, in part, by the financial incentives offered by some cloud providers

This shift creates immense opportunities for colocation providers to offer hybrid solutions that combine the scalability of public cloud with the control and security of dedicated facilities.

Power Availability Outranks AI Infrastructure Priorities According to the International Energy Agency (IEA) data centres currently account for only 1% of global electricity consumption, although this figure can vary slightly from country to country, it still puts the sector way behind other high energy consumers such as electric cars and space cooling (air conditioning). However, the continued digitisation of our lives means that the levels of power consumption from data centres will only continue to increase. Where this becomes an issue is where the rapid development of data centre real estate is not matched by power grid upgrades and power availability. The Government needs to do more to speed up the connection of our many renewable energy projects to the national grid to ensure data centres do not put a strain on local power networks.

That’s why renewable energy adoption, efficient design and green practices are no longer optional but a necessity. Meeting these sustainability goals will not only be key to complying with stricter reporting standards set to come into force under the Corporate Sustainability Reporting Directive (CSRD) but these also need to happen quickly over the next 12 months.

The current high cost of energy and the complex supply chain is making the UK less competitive to countries such as Norway, when it come to the cost of power and this, as well as energy security for all, needs to be high up on the Government’s agenda.

Preparing for regulatory overhauls

Upcoming legislation like the UK’s Cyber Security and Resilience Bill will demand enhanced security protocols, while stricter energy efficiency regulations will push operators to achieve lower Power Usage Effectiveness (PUE) targets. These regulatory changes, combined with the recent designation of data centres as Critical National Infrastructure (CNI), will place additional responsibilities on the UK data centre industry, increasing reporting and compliance burdens. Business and Government need to strike a balance in regulation to ensure it doesn’t deter investment and lead to operational inefficiencies.

Increasing pressure from Europe

The competition from European counterparts is intensifying, with Nordic countries offering significantly lower costs due to lower power costs, compared to the UK. However, new regulations in the EU are starting to create significant challenges for the data centre sector. Strict sustainability mandates are causing disputes, with operators (predominantly in Germany and France at the moment) urging their UK counterparts to avoid adopting similar measures that could stifle investment. Moreover, the anticipated costs of complying with these evolving regulations present an additional financial burden that could deter future growth and innovation within the industry.

While each country faces their own geopolitical and economic challenges many EU countries have benefitted from cheaper energy, favourable tax policies and efficient energy distribution networks, allowing operators to pass on savings to customers. For UK data centres, this creates a challenging landscape, as businesses increasingly weigh cost-effectiveness against proximity and reliability when choosing their data

infrastructure partners. To remain competitive, UK data centres must focus on sustainability, innovation and efficiency while carefully navigating regulatory and energy cost barriers, including the substantial costs associated with keeping pace with new or more stringent regulations.

There is no doubt that the year ahead holds some significant challenges for the UK data centre industry; from advancements in technology, to evolving regulations and growing infrastructure demands, the sector is predicted to experience huge growth, with which comes greater scrutiny. The UK has the opportunity to be seen as a leading hub for transformative growth in the digital economy, but the Government has a huge role to play in this success and needs to come to the table with a holistic view and plan.