The UK government is planning to unveil a big artificial intelligence data centre at the Teesworks site in north-east England, as tensions build between the energy and technology departments over the energy consumption of storage infrastructure.

Ministers have selected the former steel site in Teesside as the location for its second so-called AI Growth Zone, with plans to build the largest data centre in Europe, according to several people briefed on the matter.

A planning application for a data centre project of nearly 500,000 square metres was submitted locally late last month by Teesworks Ltd, the public-private partnership that is developing the site.

Three people familiar with the project said the Department for Science, Innovation and Technology was also closely involved in the company’s negotiations with a big investor.  

The decision to choose Teesworks comes less than four months after deputy prime minister Angela Rayner’s department issued a “best value” notice against the local public bodies responsible for it due to concerns over value for money and governance.

The site’s focus on AI could also undermine plans that have been under way since 2021 to build a blue hydrogen and carbon capture plant in the same area as the proposed data centre.

Teesworks Ltd and the local public body overseeing its activities, the South Tees Development Corporation, have formally objected to the hydrogen proposal, arguing that it would make their planned data centre unviable. 

Energy secretary Ed Miliband is deciding whether to grant a Development Consent Order to energy company BP for the hydrogen and CCS project, including rights to compulsorily purchase some of the land in question. Miliband has until August 28 to decide on the plan.

DCOs are a type of planning permission decided at government level for nationally significant projects.

It comes amid wider tensions between government departments over the energy consumption of large AI projects.

The technology department is pushing for growth of Britain’s tech and AI sectors, while the Department for Energy Security and Net Zero is concerned about how the energy and water consumption of projects such as big data centres will have an impact on its climate goals.

“The AI agenda would be way more advanced if it wasn’t for Miliband’s focus on net zero,” said one tech department official, who added DESNZ was at odds with Prime Minister Sir Keir Starmer’s tech-focused growth plans.

AI Growth Zones were introduced as part of the government’s AI opportunities action plan, published in January.

The growth zones offer areas where companies can receive streamlined planning approvals and preferential energy arrangements.

Most data centres require ample supplies of water to prevent computers from overheating.

The first AI Growth Zone, being developed in Culham, Oxfordshire, has sparked concerns about water scarcity in the area, given that the south-east of England is severely water-stressed.

A person briefed on the plan said: “Teesside will be the UK’s main AI Growth Zone.” They added: “Officials have spoken to loads of big companies, including Anthropic, DeepMind, Microsoft and Google.” 

In 2024, an independent review warned of failures in governance and value for money processes at the Teesworks project.

It also criticised the Tees Valley Combined Authority and the South Tees Development Corporation, the local public bodies responsible for it, for striking a poor-value land deal with the private sector in 2021.

The deal handed 90 per cent of the site’s development vehicle, Teesworks Ltd, to two local developers, Chris Musgrave and Martin Corney, along with options over all of the land for £1 an acre.

After public sector governance failed to sufficiently improve, Rayner opted to serve the TVCA with a “best value” notice in April 2025. An “improvement board” of local government experts is now monitoring its day-to-day activities.

 

***END***

Disclaimer:  DATACENTRE.ME may not be held responsible or liable for the content or details within this news article.

For further information, please refer to the full details of this article via the original source here.