UK firms ponder offshoring AI workloads as energy costs surge

Energy costs are already holding back AI, with one-in-five UK firms moving their AI operations overseas to dodge prices.

That's according to a survey from CUDO Compute, which found 20% of British companies polled had moved some workloads out of the country over rising energy costs.

Data center energy costs have long been a concern when it comes to the AI, in part due to aging grid infrastructure constraining capacity for a technology that has heavy power demands.

Last month, Google's president said the US needed to step up power generation to meet skyrocketing demands.

Energy costs in the UK specifically have become a key talking point amid infrastructure expansion plans. Earlier this month, OpenAI cited energy costs as a key factor behind its decision to pause the Stargate UK infrastructure scheme.

CUDO Compute's survey of 700 AI decision makers found a third of respondents said energy costs are limiting their ability to scale AI operations, with 42% adding that high energy and infrastructure costs are fuelling concerns around an AI bubble.

"AI is not abstract software. It is physical infrastructure that depends on power, land, cooling and grid access," said Matt Hawkins, CEO of CUDO Compute.

"When those constraints tighten, economics take over. If it is cheaper or easier to run workloads elsewhere, they will move, regardless of sovereignty ambitions."

The report notes that infrastructure is the key to enabling AI growth, with access to land, affordable energy, and scalable compute all potentially constraining growth.

"Right now, every UK boardroom is talking about AI, but almost nobody is talking about the infrastructure needed to power it," said Hawkins.

"Until we close that gap, there will continue to be a disconnect between policy, ambition and reality. The countries that solve this first will shape the future of AI, and the UK still has a window to lead, but it needs to act quickly."

The report predicts $600 billion in capex spend by hyperscalers this year, up from $400bn last year. But as data centers are quickly built to enable AI, campaigners and local residents continue to push back against data centres in their neighbourhoods, criticizing pollution, emissions and water use.

Sovereign AI ambitions

Energy costs aren't the only reason companies are thinking about shifting their AI workloads: AI sovereignty and data center sovereignty are also major concerns.

The European Commission yesterday backed €180 million to procure sovereign cloud services for EU institutions for the next six years, amid a wider push for digital sovereignty.

In the CUDO Compute survey, a third of respondents said they were "actively considering" moving workloads over geopolitical pressures, with 45% of those in the UK saying data or digital sovereignty, regulatory compliance, and national security were driving decisions on deployment strategy, higher than 33% in Europe.

One-in-three Brits surveyed say they are prioritizing regionally controlled compute — even if it costs the company more.

"AI sovereignty is being hotly discussed as a priority for UK organisations, but it only works if the infrastructure exists to support it," said Hawkins. "What we are seeing is a growing tension between where businesses want to run AI and where they actually can."

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