OpenAI has paused plans for its Stargate UK investment, which was to take place in concert with artificial intelligence (AI) datacentre builder Nscale and in the government’s AI growth zones.
The Microsoft-backed company has cited concerns about rising energy costs as well as the regulatory environment in the UK, particularly in copyright.
Affected locations – should OpenAI’s “pause” become permanent – are in the government’s north eastern AI growth zone centred on north Tyneside and Blyth in Northumberland.
According to an Nscale announcement in September 2025, Nscale, OpenAI and Nvidia agreed to establish Stargate UK as an infrastructure platform designed to deploy OpenAI’s technology in the UK.
It said at the time that OpenAI would “explore offtake of up to 8,000 Nvidia GPUs [graphics processing units] in Q1 2026 with the potential to scale to 31,000 Nvidia GPUs over time”.
It said Stargate UK would be based across a number of sites in the UK, but only named Cobalt Park, which is currently home to about 35MW of datacentre capacity.
Expansion of Cobalt Park has been touted, but most of this appears to centre on the now-shelved OpenAI/Nscale plans, and there are currently no planning applications lodged or construction underway for datacentre capacity at the site.
Calculated pause?
That much of OpenAI’s plans have been hedged with conditional wording and lack of concrete progress is not lost on some industry watchers. Bill McCluggage – director of IT strategy and policy in the Cabinet Office and deputy government CIO from 2009 to 2012 – said OpenAI’s decision to pause its proposed Stargate datacentre in the north east looks less a sudden setback and more a calculated pause.
“The stated concern about uncertainty around UK copyright rules and high energy costs are real enough, particularly given the government’s fickle approach to copyright regulation and how power-hungry these facilities are,” he said. “But they are unlikely to be the whole story.
“With an IPO on the horizon, it is hardly surprising that OpenAI is tightening its risk profile, especially against a backdrop of rising infrastructure costs, supply chain fragility in advanced chips, and questions about the pace of AI commercial returns. Reports of delays and disagreements in similar US projects only reinforce that caution.”
McCluggage also suggested the move may be a means to apply pressure for clearer government support and policy certainty.
“In that light, the pause feels less like retreat and more like prudent positioning before committing to a multibillion-pound bet,” he said.
OpenAI has also cited concerns about “regulation”, in particular the UK government stance on copyright with regard to AI training. Here, the government had originally been set to allow AI training to be exempt from copyright, but then faced a backlash from creative sectors fronted by Elton John and Dua Lipa. In late March, the government adopted a holding position that barred open access to copyrighted works for AI training.
Liberal Democrat peer Lord Clement-Jones said: “This is disappointing news, but citing regulation as a reason for not proceeding with their investment in the UK is laughable given the European regulatory landscape and similar copyright issues. Energy costs and other wider economic risks may well have deterred OpenAI alongside potentially overstretched global investment plans.”
Call for clarity
Conservative peer Chris Holmes called for clarity around the issue, and the need for a UK AI Bill.
“What we all need when it comes to AI is clarity, consistency and a coherent approach,” he said. “From the government right now, this is not quite the case. By yet again ‘ducking’ the copyright issue last month they leave everyone in limbo, with a sub-optimal non-solution for all concerned.
“If the government really wants us to optimise the AI opportunity, they must bring forward a cross sector, cross economy AI Bill that brings clarity, consistency and coherence of approach which will benefit datacentre build, startup and scaleups, and a real sense of UK sovereign AI,” said Homes. “Sadly, it seems in the upcoming King’s Speech on 13 May, they have no intention of taking this clear positive action.”
OpenAI and the UK government signed a memorandum of understanding in July 2025 aimed at strategic partnership to deliver AI-driven growth.
At the time, OpenAI cited its use by big UK names that included the NHS, NatWest, Oxford University and Virgin Atlantic.
OpenAI was careful to label commitments as “non-binding”, but these included exploring use of AI in the public sector, developing UK sovereign AI capability and security research.
At the same time, OpenAI said it would increase its footprint in the UK from the current 100 staff.
