One sector of the UK economy is booming – data centres

The UK market data centre market is growing at 5.5% per year, outperforming many other sectors within the UK’s economy. New facilities are being created quickly around the world, with the UK a leading location. But these construction projects bring unique challenges, as well as opportunities.

The state of play with data centres

Analysis from 2022 places the UK third in the world for data centres, well behind the US and only a whisker behind Germany. New centres are continually being built, providing a boost to construction, IT and other sectors. The website Statista (if you compare separate reports) estimates UK market growth as higher than many countries, and other data sources show the UK now ahead of Germany as the number two player globally.

Why is this market growing?

Some factors aren’t specific to the UK. One reason is the increasing take-up of cloud-based software. One source assesses global growth here at 18%. Another factor is the Internet of Things; there are currently 13 billion Internet-connected devices, a number expected to double by 2030.

Contractual structures are increasing in sophistication, with newer options such as colocation growing; this means the situation where those who own the servers rent space rather than operating their own facility. New centres dedicated to colocation are increasingly seen.

Why is the UK doing well?

The United Kingdom has a number of advantages as a data centre site:

• It is a unique hub for telecommunications cabling, both transatlantic and European
• One report assesses the cyber-security as the best in the world, and the UK in general is regarded as business-friendly, with strong rule-of-law frameworks and good energy security
• The UK is an international finance hub, and the finance sector holds lots of data
• Data centres in cooler climates can need less artificial cooling
• Less happily, we enjoy poor average download speeds compared to many neighbours, but fibreoptics investment is closing this gap and creating growth while catch-up continues

Is the UK guaranteed to continue doing well?

The predictions discussed above all extend a few years forward, and clearly factor in obvious concerns that might be raised. Whether such concerns dampen longer-term growth is less clear. Overall economic growth in the UK is poor, and Brexit may or may not cause providers to shift resources across the channel.

The National Security and Investment Act 2021 also gives the government very broad powers to intervene in a range of investments and transactions, with data infrastructure identified as a specific source of possible government concern. Analysts debate whether this might deter foreign investment here, with little consensus. Outcomes may hinge on how freely authorities actually use the powers granted.

What does this mean for construction?

Sources agree that data centre construction is strong in the UK. London is the centre, unsurprisingly, but not overwhelmingly, accounting for a fairly small minority of the national total. The average data centre is estimated to host 100,000 servers (with dozens stored together on each rack), but small centres of 1,000 servers are certainly seen, so a wide variety of new projects is possible.

The UK construction industry is currently facing shortages of materials and also skills, particularly within specialist subcontractors. Commence planning and communication as early as possible to avoid price escalation, schedule issues or corner-cutting to meet those schedules. If saving money by the use of brownfield sites, check carefully the time and cost implications of any possible remediation.

A challenging construction task

Building data centres requires precise planning and attention to detail: for example, floors in data centres must bear unusual weight, with civil engineering implications. Given the equipment onsite, particular attention needs to be paid to fire safety and fire compliance.

Data centres demand huge amounts of electricity, which the local power infrastructure may or may not be able to support without planning and work. Some owners even build and own their substation to ensure adequate and reliable supply.

Much of that power will go to cooling, with cooling facilities often requiring high risk works involving water and heavy lifting of specialist equipment. Design and other risks such as insolvencies are factors also, not to mention installation of other expensive equipment, often while works continue. Dovetailing of numerous, complex insurance policies is usual.

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