What happened
In the Autumn Budget 2026 (delivered 28 October 2026), Chancellor John Healey announced the 'British Data Centre Covenant', which makes priority grid connections and (where necessary) permission for on-site generation conditional on five mandatory tests for strategic data centres: paying a fair share of energy costs; agreeing Local Benefit Plans with local investment; achieving Power Usage Effectiveness of 1.3 or better with closed-loop/minimal public water use; creating local jobs/apprenticeships and contributing to UK AI hardware development; and providing secure compute access to NHS/public services while meeting enhanced cyber-resilience standards (plus annual energy/water reporting and UK supplier preference). A new Ministerial Control Centre chaired by the Minister for AI, Kanishka Narayan, will accelerate planning and grid connections. The wider AI package added £500m for AI safety and security, £140m for the sovereign AI unit, an AI Challenge Prize, £18m for advanced chip design and £6m for Glasgow. UK-wide capacity target is 6GW of AI data-centre capacity by 2030.
Why it matters
Grid connection — not planning consent — is the binding constraint on AI data-centre buildout, and the covenant makes accelerated grid access conditional on community, energy, water, and public-service-security commitments. This directly shapes where and how AI compute infrastructure (and therefore sovereign AI capability) can be built in the UK, and imposes meaningful obligations on operators (energy/water transparency, NHS/public-service compute access, cyber resilience, UK supply-chain preference).
Action needed
Data-centre developers and operators seeking priority grid connections in England should prepare to evidence the five covenant tests (PUE, water closed-loop, local benefit plans, job/apprenticeship investments, NHS/public-sector compute access, cyber-resilience), and await the 'strategic' project definition and provision of the new Planning and Infrastructure Act powers.