UK Budget's Data Centre Covenant offers grid priority to strategic AI sites that meet five sets of tests

The UK government used its Budget on 28 October 2026 to publish a Data Centre Covenant, a Treasury policy paper that sets out what data centres are expected to deliver and what the state will do in return. All operators are encouraged to follow it, but the tests become conditions for "strategic" projects that want government help to reach the grid faster. The government estimates the country needs 6GW of AI data centre capacity by 2030; Capacity reports that this is roughly three times the current operational total of around 2GW.

The tests

The covenant groups its expectations under five headings. On energy, data centres should pay their own way so that households and businesses do not carry the cost, while making credible capacity commitments and supporting clean power. On communities, strategic sites must agree a Local Benefit Plan with substantial investment scaled to the size of the development, on top of existing planning obligations. Environmental standards include minimising water use, favouring closed-loop cooling, reusing waste heat where viable, publishing annual energy and water figures, and reaching a Power Usage Effectiveness of 1.3 or better for new facilities. The remaining tests cover local jobs, apprenticeships and UK supply chains, including a contribution to British AI hardware for the most strategic sites, and security, such as secure compute access for services like the NHS and work with the National Cyber Security Centre.

What qualifying sites get

In return, the government says it can reserve and reallocate grid connections using powers in the Planning and Infrastructure Act, work with NESO and network companies to find spare capacity, and move pre-2030 connection contracts to strategic data centres. For exceptionally strategic projects, a tightly controlled framework would allow temporary on-site generation while they wait for the grid. A new Ministerial Control Centre, chaired by the Minister for AI, will decide on support. A draft national policy statement for data centres is also planned; Capacity reports it is open for consultation until 8 January 2027 and indicatively covers projects of at least 100MW.

Open questions

The covenant does not yet define a strategic data centre, attaches no figures to community benefits and sets no numerical water target. Industry body techUK welcomed the recognition of domestic capacity but warned that the details remain to be filled in and that the Budget offers no short-term relief on electricity prices. Capacity's analysis notes that the measures mainly move chosen projects up the connection queue rather than shortening it.