Planning matters

In the midst of the Labour government’s push for increased rates of house building, recent reform has sought to unlock other investment opportunities to support the modern digital economy and nowhere is this more relevant than the data centre industry.

Significantly, data centres are now categorised as Critical National Infrastructure (‘CNI’), in recognition of their importance to the British economy and their role in enabling the Country to recover from critical incidents, a status on par with water, energy and emergency service systems.

Whilst this nomenclature is not a planning designation applied traditionally in decisions, planning policy has seen a parallel change in the priority given to data centres. The previous National Planning Policy Framework (‘NPPF’) made no specific reference to data centres when requiring planning policies to set criteria or identify strategic sites for local and inward investment (previous paragraph 86(b)). In contrast, the revised December 2024 NPPF inserts the need for Planning Authorities to consider data centres as supporting the needs of a modern economy, and there is now a requirement for policy makers to consider appropriate locations when preparing local plans (paragraph 86(c)). Paragraph 87 gives more explicit recognition of the need for local planning authorities to support proposals for new or upgraded facilities, and the infrastructure that is required for growth.

Together, these updates require local policies and decisions to recognise the need for data centres and their specific locational requirements. The policies represent an enormous shift, creating a supportive policy position for the sector.

Alongside this change, the Ministerial Statement made on 12 December by the Minister for Housing and Planning, Matthew Pennycook MP, also confirmed that the Government will “follow through with prescribing data centres, gigafactories and laboratories as types of business or commercial development capable of being directed into the Nationally Significant Infrastructure Projects [‘NSIP’] consenting regime, depending on the scale of the project”[1].

Categorising large-scale data centre schemes as potential NSIPs itself points towards an elevation in the status of the sector in planning. It is envisaged that this consenting option will be adopted where promoters seek to take advantage of the alternative route through the planning system, perhaps where local level buy-in to the value of data centres to the UK economy is slow in gaining political traction.

The final piece in the puzzle (at least for now) is the recent Government announcement of the ‘AI Opportunity Action Plan’ which proposes action to win the global race on AI. Data centres are recognised was a key building block in the strategy to capture an AI future.

In such a short time, the policy context for data centres has gone from a vacuum to today’s plethora of policy support and encouragement. There is now greater certainty which should stimulate investment in the UK. We now have an overdue policy backbone for the sector.

Moreover, we are beginning to see what this changed context means for data centre schemes. Following up on last year’s positive decision of a Green Belt data centre proposal in Buckinghamshire (ref. PL/22/4145/OA) noting here that the Government directly intervened in the appeal process (to deliver the approval), we see local authorities following suit. On 23 January 2025, Hertsmere Council granted planning permission (ref. 24/1152/OUTEI) for one of the largest cloud and AI data centres in Europe. The DC01UK data centre, located east of South Mimms Services represents a huge step forward in data centre development, solidifying Hertsmere’s status as a leader in the southeast as a tech and media superhub.

The decision demonstrates how far the planning world has moved in recent months. Here we have a Council’s decision recognising that ‘very special circumstances’ associated with a data centre scheme exist to justify Green Belt development. A vast contrast from when I first worked on data centres schemes, faced with concerns about unfavourable employment floorspace ratios, to now, a growing acceptance that data centres are front and centre of any forward-looking strategy for economic growth.

Whilst this is good for data centre capacity going forward, it is also good for the planning system – often derided as a brake on development ambition, here we can point to a fleet-of-foot response, with planning policy and decisions reacting positively to critical national needs. 

The new Government has recognised that to be a global leader in data innovation and AI, a positive national policy position is required to deploy the necessary underlying physical infrastructure, and the results are already there to be seen.

Just as I am about to press ‘send’ on this blog, out pops the PIB[2], the Government’s flagship of planning reform. Does this Bill change the positive agenda? The proposed improvements to the DCO consenting process (streamlining National Policy Statements preparation, easing consultation requirements, relaxation of acceptance criteria, restricting judicial review opportunities) will benefit those data centre promoters looking to ‘opt in’.

There are provisions granting the Secretary of State and the Gas and Electricity Markets Authority (GEMA) a three-year power to amend or modify electricity licenses and connection agreements. These powers might ring a few alarm bells – given much has been made of the ‘power grab’ of data centres, with promoters securing access to power over the long term, with the suggestion that such actions subsequently prejudice other developments (such as housing) from coming forward. Whilst the connection debate should really be focussed on electricity supply more generally, rather than finger-pointing at a particular sector, do these new PIB provisions hint at future interventions from the Government, to redirect power? And if this is the case, will data centres with connection agreements be the target?

Reading the Guide to the Bill, this initiative (and an additional provision that imposes a duty on the grid and electricity distributors to “have regard to the designated strategic plans”) is more about moving away from the current ‘first come, first served’ connection process to a ‘first ready, first connected’ set up, that takes account of the strategic operational needs of the system as a whole. Furthermore, the Guide states that the proposed reforms will encourage investment “in anything which requires electricity, from housing and hospitals to gigafactories and data centres”. Hence, a more positive – and, most likely, correct - interpretation of these provisions in the PIB is that rather than be the target for intervention, data centres could be a beneficiary. The CNI designation; the NPPF changes; the potential for data centre schemes to qualify as NSIPs; and the recent change in the fortunes of planning applications for data centre schemes, all point towards a positive future for planning’s ugly duckling. Perhaps this new provision to give the power to modify licenses and connection agreements is simply adding to this positive context?      

If you would like to explore what these developments could mean for your projects, our team at Lichfields would be happy to discuss the implications in more detail.