Could investing in data centres be the key to unlocking economic growth and attracting significant foreign direct investment (FDI) to the UK? A new report by Khazna, a leading data centre operator, suggests it could. However, the government must be willing to invest first.
Founded in 2012 by Mubadala Investment Company, a national wealth fund in the United Arab Emirates, Khazna designs, builds, and operates 16 wholesale data centres across Abu Dhabi and Dubai. Its report highlights the growing importance of data centres, particularly in the context of the artificial intelligence (AI) boom.
AI, with its insatiable appetite for data and training, demands massive computing power. While the hype surrounding AI has yet to translate into widespread tangible benefits, the focus has shifted to building more data centres, seen as crucial to unlocking AI's true potential.
The report, authored by professional services firm Whiteshield on behalf of Khazna, predicts that the global generative AI (GenAI) market could reach a staggering £1.1 trillion by 2032. This growth, the report argues, hinges on a rapid expansion of data centre infrastructure. The report forecasts a surge in staff requirements for data centres, from 2 million in 2019 to 2.3 million by 2025, indicating potential for even greater expansion in the years to come.
This expansion could have significant economic implications, driving a construction boom around the world. The report cites a US study which found that building a typical data centre generated £170 million in capital expenditure, employed 1,688 local workers, and contributed an average of £192 million in economic output.
Beyond construction, data centres are also a major attractor of FDI, particularly in Europe. In 2022, more than £16 billion of the £35 billion invested globally in data centres flowed into Europe. Germany and the UK currently lead the charge with over 500 data centres each, significantly outpacing France, the closest continental competitor, with just over 300.
Philippe Nahas, Partner at Whiteshield, emphasised the strategic importance of data centres for economic prosperity: "Investing in robust data centre infrastructure is not just about technological advancement; it's a strategic catalyst for economic prosperity and job creation." He highlighted the crucial role of data centres in the ICT sector, hosting cloud services, supporting digital content distribution, and enabling data analytics, all of which contribute to a vibrant and competitive ICT ecosystem.
However, the report acknowledges the pressing need to address the environmental impact of data centres. The enormous energy consumption required to power these facilities poses a significant challenge. While many companies are setting ambitious sustainability targets, the report notes that meeting these targets, particularly for energy-intensive operations like data centres, remains a considerable challenge.
Furthermore, beyond the optimistic projections of a booming AI economy, concerns remain about the viability of this investment. With whispers of an impending AI bubble and governments facing budget constraints, the commitment to funding data centre development remains uncertain. Moreover, the question arises whether investing in data centres is the most efficient way to stimulate economic growth and job creation, or if alternative initiatives, such as renewable energy development, might offer a more sustainable and impactful solution.
The report presents a compelling case for the potential of data centres to drive economic growth and attract significant FDI. However, the feasibility and long-term sustainability of this approach require careful consideration, particularly in light of the environmental and financial challenges involved. Ultimately, the decision to invest in data centres will require a careful assessment of both its economic potential and its broader societal implications.