Data centres and local socio-economic impacts: jobs, infrastructure, and improving the attractiveness of places

Key questions answered here include: What are the local socio-economic impacts of data centres? How many jobs can data centres create during construction and operation? What infrastructure is needed to attract a data centre? How do power, water, fibre connectivity and site requirements affect data centre location decisions? What can local authorities do to maximise the benefits of data centre investment? What is an AI Growth Zone in the UK?

What are the local socio-economic impacts of a data centre?

Data centres enable economic growth in the UK and global economies, but their local socio-economic impacts vary by place. As well as creating direct impacts, they can support growth in sectors such as advanced engineering, defence, low carbon energy, professional and financial services, other IS8 sectors, education, health and public services. UK Government policy promotes the delivery of data centres, including through the NPPF, UK Infrastructure Strategy, UK Modern Industrial Strategy and AI Opportunities Action Plan, making it important for local areas to understand both the benefits and the practical requirements of attracting data centre investment.

Whilst beneficial to the UK economy, it is valid to ask how much of this benefit will accrue within local economies, both directly and indirectly. Below, we discuss some of the potential areas of impact of data centres, and the questions that need to be asked about them.

How do data centres create jobs and economic activity during construction?

The construction phase of a data centre can generate substantial local economic impact through direct employment, indirect supply chain activity and induced spending by workers. An appraisal of a proposed data centre campus in Havering, London, carried out for the local authority, suggested 14,000 person-years of employment and £1 billion of local GVA benefit during construction, which is significant.

Construction of a data centre will generate direct employment on site, but it is necessary to consider the leakage of employment and spend out of the local economy. Construction will generate a range of jobs, both directly and indirectly, in areas such as transport, catering, and accommodation; and supply chain opportunities for local businesses. There will also be multiplier impacts in the local economy, from spend by temporary migrant workers. However, many components and specialist skills may be brought in from elsewhere (both nationally and globally). To maximise local benefits, there is potential to develop skills and expertise in the local workforce and business base to optimise engagement in local projects, and ultimately to export these skills and expertise to other areas, bringing income to the local area (similar to the approach followed for nationally significant infrastructure projects such as Hinkley Point C).

How many jobs do data centres create during operation and what are the long term economic benefits?

During operation, data centres create direct jobs in facilities management, engineering, security, maintenance and related technical roles, alongside indirect employment in the local economy. The number of operational jobs is likely to be modest compared with construction employment, with one case study suggesting 54 direct jobs, 108 indirect jobs and £11 million of GVA uplift. However, these jobs are often high quality and better paid than comparable roles in other industries, with WPI/Microsoft (2025, p.5) suggesting an uplift of £10,000 per job. With investment in skills, training, local business capability and local procurement, the benefits to the local economy can be increased.

Much of the published literature on the economic impact of data centres suggests that large data users will cluster nearby. However, the need for businesses to be close to data centres depends on their latency requirements (i.e. the speed of access to data, which is typically measured in milliseconds). High-frequency financial trading operations need to be close to data centres (hence the proliferation of data centres close to London), but most large data users can be within hundreds or thousands of kilometres, so do not need to be located in close proximity to data centres.

If some businesses with low latency requirements do locate nearby, this could lead to further clustering, attracting more investment and high-quality jobs to the local area. Relative proximity to data centres, and even the perception of proximity and access to data centres, could potentially lead to growth in the local area and the wider region, e.g. attracting further complementary investment into existing and growing data-intensive clusters.

What other benefits can data centres bring to local economies?

As well as direct economic and employment impacts, there are other ways in which data centres could bring benefits to a local area, including:

• Business Rates payable.
• Investment in data, power, water, and transport infrastructure which may enable growth in other businesses that locate nearby.
• Data centres’ power requirements can generate sufficient baseline demand to justify new investment in low carbon energy generation in the local area.
• Waste heat recovery can be directed into heating local businesses and homes.
• Data centres can provide a high-profile visible statement of the potential and growth aspiration in the local economy.

What are the potential negative economic impacts of data centres?

Whilst much of the focus is on the positive impacts of data centres, a robust assessment will consider the potential negative impacts.

There may need to be large public investment to ensure sufficient utilities and infrastructure are in place to attract data centres.

During construction, there may be displacement of labour and supply chain activity, away from other projects; which may crowd out the delivery of other projects.

Data centres use a large amount of electricity (see further discussion on the availability of electricity, below). This could lead to the crowding out of other electricity users, including future residential households. This also raises concerns about carbon emissions, which could conflict with Net Zero and Climate Emergency strategies. Data centres also use large amounts of water, equivalent to many thousands of residential households. Again, this could lead to the crowding-out of other current and potential future water users. Water stress is higher in the East of England, so it may be that locations in the west of the UK are more attractive to data centres in this respect.

Data centres, when operational, provide low employment density, so there may be an opportunity cost of using employment sites for these high power-demand, high water-demand uses. Other occupiers may provide more local jobs and less strain on local utility provision. Demand for sites for data centres has the potential to push up the cost of sites and utilities, with negative impacts on other local businesses and their growth potential.

What happens when multiple data centres are developed in the same area?

With more than one data centre, the benefits will be larger, and the potential for agglomeration effects will be greater, but the risks and downsides will also be compounded. The delivery of several data centres could reach a tipping point in terms of power or water availability, significantly increasing some of the negative impacts discussed above; or limiting the ability of a local area to accommodate more data centres or other development.

What local infrastructure and support are needed to attract a data centre?

Power

Data centres have significant power requirements, with a campus requiring hundreds of Megawatts. The power supply must be reliable (limiting the opportunity to use some forms of renewable energy such as wind and solar). Access to power (particularly low carbon or renewable power) is critical in determining the location of data centre campuses. But does proximity to power generation sources and their transmission networks actually give you access to the power generated? Power generated by say, a nuclear power station, will go directly into the National Grid, so the idea of local access to power needs to be tested further. There may be opportunities for private wire power transfer i.e. not using the National Grid.

Potential actions could include improving access to power; establishing the scale of potential demand; and engaging with power suppliers on behalf of potential users.

Water

Data centres need access to sufficient water for cooling.

Potential actions could include establishing the scale of demand; and engaging with water companies to discuss how the demand can be met.

Fibre/digital connection

Data centres need high capacity, low latency network connections (see discussion above).

Potential actions could include establishing the capacity of local data networks; calculating the scale of demand; and engaging with data infrastructure companies to discuss how the demand can be met.

Sites

Data centres need affordable, deliverable sites (in terms of planning, infrastructure, access to utilities, funding etc.). They should have low flood and other environmental risks, and solid ground conditions.

Transport

Transport access is required for both construction and operation, although data centres are unlikely to generate significant amounts of traffic during operation.

Skilled local workforce

Suitable skills will be required for both the construction and operation of data centres. Local training provision can be tailored to ensure these skills are available.

Local supply chain

There are opportunities to attract supply chain businesses to set up a presence locally, and help local businesses to identify and access supply chain opportunities both during construction and operation. Actions could include a supply chain portal; innovation and R&D support; inward investment attraction; business start-up support; and business growth support.

Strategy support

Robust and detailed support for data centres is needed in local and regional spatial and economic growth strategies, to give investors and developers the confidence to deliver data centres. It is also important to engage the local community, and secure its support for data centre development.

Financial and fiscal incentives

These can make a location more attractive to new data centres, and could include Business Rates relief; Enterprise Zone benefits, including simplified planning; and grant funding. A local authority could work with the UK Government to bring some of these forward.

What is an AI Growth Zone in the UK?

AI Growth Zones are proposed to unlock investment in data centres and supporting infrastructure by improving access to power and providing planning support. They are intended to drive innovation, create high-skilled jobs, and strengthen the position of the UK as a leader in AI. The application process for AI Growth Zones is open and unlimited.  Detailed technical criteria have been published by UK Government, including requirements for power, water, digital connectivity and sites^[1].

AI Growth Zones will be given some prioritisation for connecting to the power grid; potentially subsidised power; receive planning support; receive direct funds; and secure Business Rate retention.

Five AIGZ’s have been established at:

• Culham in Oxfordshire
• Blyth in Northumberland
• Anglesey in North Wales
• M4 corridor in South Wales
• Lanarkshire in Scotland

Significant numbers of high-quality jobs (typically 5,000 to 8,000) have been forecast in each AIGZ.

[1] https://www.gov.uk/government/publications/ai-growth-zones/ai-growth-zones-open-for-applications