US technology giant Microsoft has pledged £2.5 billion to build artificial intelligence infrastructure in the UK, putting developers on alert for opportunities to develop more AI data centres and bring thousands of graphic processing units to the UK.
The massive investment was pledged to day as the government hosted a Global Investment Summit at Hampton Court, former palace of King Henry VIII in London.
Prime Minister Rishi Sunak kicked off the event by saying the government was unveiling £29.5 billion of new investment for "thriving UK sectors" as A-list chief executives and investors are hosted in the capital. These include Stephen Schwarzman, chairman and chief executive of Blackstone, Amanda Blanc at Aviva, David Solomon from Goldman Sachs and Jamie Dimon at JPMorgan Chase.
The 200 or so global chiefs will be getting the full UK red carpet treatment with a reception at Buckingham Palace hosted by King Charles III.
Microsoft's pledge chimes with the views of Blackstone's Steve Schwarzman who said his firm is eyeing buying opportunities in real estate across the UK and Europe as central banks become less aggressive with rate hikes.
Speaking to Bloomberg on the sidelines of the event, Schwarzman said he is particularly interesting in deals involving data centres, warehouses and student housing across Europe.
“The deal business is not totally in mothballs and these things start again,” Schwarzman told Bloomberg.
The government's announcements at the summit are a mix of new and relatively new pledges as it attempts to kickstart the economy and the Levelling Up agenda ahead of a likely election next year via global investment in new, burgeoning sectors. Last week in its Autumn Statement the government announced billions of pounds of tax breaks to business by making the “full expensing” capital allowance regime permanent.
It also then unveiled a £4.5 billion Advanced Manufacturing Plan, a £2 billion investment from Nissan in Sunderland, and a new Investment Zone in the North East which will create 4,000 jobs.
The biggest investment pledge announced today is from IFM Investors, a major Australian infrastructure investor, which says it plans to spend £10 billion over the next four years on large-scale UK infrastructure and energy transition projects.
IFM will sign an memorandum of understanding with the Department for Business & Trade at the summit to identify commercially viable opportunities, with potential projects including Nala Renewables, a UK-based portfolio company within IFM, which is actively seeking investment opportunities in the UK as it looks to achieve a renewable capacity target of 4GW by 2025.
Australia's Aware Super has committed more than £5 billion for projects in energy transition, affordable housing, life sciences, innovation, technology and digital infrastructure after opening a UK office.
The UK’s R&D sectors will also see a £1 billion investment from the Ellison Institute of Technology into its recently announced Oxford Campus, bringing together global researchers through a new interdisciplinary research and development facility to help solve some of the world’s biggest challenges.
Oxford Quantum Circuits, which is showcasing at the GIS, has also announced it is raising $106 million (£85 million) for R&D projects.
This will be implemented through a rolling 10-year investment of approximately £1 billion.
Microsoft's pledge comes as the battle to house data centres able to propel new technologies continues to heat up globally, and across Europe.
Demand for European data centres broke records during the second quarter of 2023 thanks to the growing use of artificial intelligence in particular, according to JLL.
Take-up more than doubled from 51 megawatts in the first quarter to 114 MW in the second quarter across Frankfurt, London, Amsterdam, Paris and Dublin, it reports.
JLL says London remains the largest market with a total of 902 MW, amounting to a 35% share of total tier one supply. The city saw a significant drop in the amount of new supply added so far this year at only 7 MW. However, the development pipeline remains strong with a string of new developments announced during the second quarter.
Steve Lang, head of science research at Savills, reflecting on the commitments to life sciences development in the UK, said: "As highlighted at the Global Investment Summit, the UK’s role as a world renowned centre of knowledge, discovery and innovation has made it a key global location. There has been a rising interest in challenges for delivering solutions for human health and healthcare via the software, mobile and wider technology sectors, which all have a significant presence in the UK.
“Therefore, it’s encouraging to see a commitment from BioNTech to tap into the UK’s AI and machine learning abilities, and for other companies to leverage our expertise in quantum computing.
“This crossover between the life science and technology sectors has highlighted the potential future layer of commercial real estate demand that will emerge in decades to come, to the benefit of the UK in terms of jobs and economic growth.
“Funding future innovation growth will be derived from governments, but also the investment community, including corporate venture capital. However, we see a continued rise of philanthropic money and foundations funding science. This is underlined by the commitment from the Ellison Institute for Transformative Medicine and is also evident elsewhere across the UK."
Lang said that overall, to ensure that the UK continues to rank highly when it comes to innovation and scientific discovery it is vital to deliver new commercial floorspace to the market, for both existing and incoming businesses.
"The 'right space in the right place' is required to continue to accommodate ‘discovery’ in order to benefit human health.”
Nick Blevins, partner at Cushman & Wakefield, said: "While it is exciting to see businesses like BioNTech and MSD make significant commitments to the UK Science Ecosystem, which is a testament to the world class research the central to the Golden triangle, we are still losing too many businesses to the US and Europe as the post Brexit regulatory burden reduces the appeal of long-term investment in the UK. As developers start to satisfy the shortfall in R&D space, we need occupiers to have confidence that the UK is the right environment to grow and not just be a source of intellectual property to be developed elsewhere."
This article was updated on 27 November to add quotes from Lang and Blevins.