Budget 2026 has created a new route for strategic UK data centres to secure faster electricity connections, including reserved grid capacity, transfers of pre-2030 connection contracts and temporary generation on site where permanent power cannot arrive in time.
The Data Centre Covenant published by HM Treasury sets conditions that projects will have to meet to qualify for enhanced government support. The Government estimates the UK will require 6GW of AI data-centre capacity by 2030 and has put electricity connections at the centre of the new policy.
The measure forms part of the wider housing, infrastructure and investment package examined in LCM's construction analysis of Budget 2026. For data-centre developers, the immediate change is a new Ministerial Control Centre with powers intended to shorten the route from an allocated grid position to usable electrical capacity.
Budget 2026 introduces a new Data Centre Covenant covering grid connections, temporary power and infrastructure requirements for strategic UK data-centre developments. Illustration: London Construction Magazine.
Government can reserve and reallocate grid capacity
Strategically important data centres may be given access to future capacity reserved under powers in the Planning and Infrastructure Act. Capacity released when other projects leave the connections queue may also be reallocated to qualifying schemes.
The Government will work with the National Energy System Operator and network companies to identify locations where electricity capacity could become available before 2030. Where existing measures are insufficient, the same powers may be used to facilitate transfers of pre-2030 data-centre connection contracts to projects judged strategically important.
A further option is temporary power. The Government will develop a controlled framework allowing exceptionally strategic projects to use generation on site until their grid connection is available. The Covenant says this route will only apply where the other connection measures cannot secure capacity in time and will be subject to conditions including energy security.
That intervention goes directly to the delivery constraint identified in LCM's analysis of grid power becoming the critical path for UK data-centre construction. Ofgem figures cited in that analysis showed total demand connection applications rising from 41GW to 125GW between November 2024 and June 2025, with at least 80GW attributed to data centres.
Developers will have to meet new project tests
Enhanced support comes with conditions. Strategic data centres will be expected to make credible commitments for the grid capacity they request and contribute towards the energy-system costs their developments create.
Developers will also have to agree a Local Benefit Plan with the host community. The investment is to be linked to the size of the development and can support local transport, parks, town centres and other local priorities. This sits alongside existing planning obligations such as Section 106 agreements and the Community Infrastructure Levy.
The environmental requirements reach into building and MEP design. New facilities are expected to be designed for a Power Usage Effectiveness of 1.3 or better, reduce demand on public water supplies through measures such as closed-loop systems, and provide for waste-heat recovery where there is a viable user nearby.
Strategic operators will also be expected to report annually on energy and water consumption, efficiency, emissions, heat reuse and participation in electricity-system flexibility services.
UK suppliers and electrical infrastructure move up the programme
The Covenant includes requirements around employment and procurement. Developers are expected to create local jobs, provide paid apprenticeships and training, and prioritise UK suppliers and technologies. The most strategically important schemes will also be expected to contribute to the development and deployment of British AI hardware.
For construction teams, the connection measures extend beyond the data hall itself. The Government intends to give developers greater choice to self-build connection infrastructure, subject to system and consumer protections, while developing more flexible grid connections and operational controls that could allow additional demand to connect without compromising network security.
That brings substations, transformers, switchgear, cable routes and connection works further into the development programme. On large campuses, those packages can determine when the first usable megawatts become available even where the shell, MEP installation and commissioning programme are progressing separately.
The Covenant also backs Ofgem's proposed data-centre commitment fee and queue-management measures intended to remove speculative demand from the connections queue. Government policy will continue to align future data-centre connections with regional infrastructure capacity beyond 2030, taking land, water and electricity constraints into account.
National planning route will follow
Planning policy is moving alongside the power reforms. The Government will publish a draft Data Centre National Policy Statement for consultation, creating a decision-making framework for projects seeking development consent through the Nationally Significant Infrastructure Project regime.
The five AI Growth Zones across England, Scotland and Wales will also continue as locations where planning and infrastructure delivery are being coordinated for additional AI capacity.
The Government has not yet published the final definition of a strategic data centre. Further criteria are due to set out which projects can qualify for the Ministerial Control Centre, reserved or transferred grid capacity and the temporary-power framework.
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