OpenAI says energy costs and regulations have led to it pause investment that would have boosted plans for an AI Growth Zone in the North East
An aerial view over Cobalt Park, the largest business park in the UK(Image: Handout)
One of the world’s largest AI companies has paused plans for a multibillion-pound investment that were slated to help bring thousands of jobs to the North East.ChatGPT developer OpenAI said energy costs and regulation in the UK were holding back investment.
The US technology giant had last year agreed to deploy its Stargate data centre project at a new artificial intelligence (AI) growth zone in the North East, working with some other massive global companies to bring its Stargate UK project to sites including Cobalt Park, in North Tyneside, and Blyth, Northumberland.
At the time, it was said the initiative would bring thousands of jobs and multibillion-pound investment into the North East. But OpenAI said the plans were being shelved until the “right conditions” allow for long-term investment in the UK’s infrastructure.
A company spokesman said: “We see huge potential for the UK’s AI future. London is home to our largest international research hub, and we support the Government’s ambition to be an AI leader.
“AI compute is foundational to that goal – we continue to explore Stargate UK and will move forward when the right conditions such as regulation and the cost of energy enable long-term infrastructure investment.”
The reference to energy costs come at a time when prices are being pushed higher by the US and Israel’s war with Iran. Data centres are powered by very large amounts of energy so are more likely to be exposed to volatile prices.
The Stargate project had been announced last October during President Trump’s state visit to the UK. It had planned to invest billions of dollars into AI infrastructure with the involvement of OpenAI, but also tech giants including Nvidia and Microsoft.
At the time North East mayor Kim McGuinness said the investment had put the region at the “forefront of the next technology revolution” while Prime Minister Sir Keir Starmer said it marked a “generational step change in our relationship with the US.”
A North East Combined Authority Spokesperson said: “It is disappointing news that this is on hold, but it reflects national challenges around energy pricing and regulatory certainty rather than the strength or ambition of our region. However, we will continue to work with government to explore ways to remove the barriers and ensure this can move forward.
“The North East remains one of the UK’s designated AI Growth Zones, with strong assets in power, land, skills and applied innovation, and our direction has not changed. We remain open for business and focused on securing investment, jobs and long‑term growth for local people.”
A Government spokesperson said: “The UK is home to the third largest AI market in the world and has attracted more private AI investment than any other country in Europe. We are working across Government to build on this strength and back even more investment in the UK’s AI and data centre infrastructure.
“We are working with OpenAI and other leading AI companies to strengthen UK compute capacity, while also taking steps to cut energy costs and speed up grid connections for eligible data centre projects.”
It isn’t immediately clear what OpenAI’s actions will mean for the North East’s AI growth zone, which had been fairly loose when announced last year. Work has started on a data centre at Cambois, near Blyth, which is backed by American firm QTS.
But the company’s actions will be a major blow to the Government, which is coming under significant pressure to reduce energy bills for households and businesses. Opposition parties want Ministers to allow more drilling for oil and gas in the North Sea.
Conservative MP and shadow science minister Ben Spencer said: “When global firms cite high energy costs and regulatory uncertainty as reasons to walk away, it tells you everything about the direction of travel.
“For too long, Labour have prioritised courting big tech headlines while neglecting our domestic start-ups, but also the fundamentals that actually attract investment at home.”
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