Chancellor John Healey used his first Budget on 28 October 2026 to put artificial intelligence at the centre of the government's growth plans, with more than £700 million committed to AI across the package. The Budget document says around £500 million will go towards building secure foundations for an AI-enabled economy, alongside a new Sovereign AI Unit backed by £140 million to channel investment into strategic British AI firms. Healey told MPs that sensitive data should stay under British control, arguing that when the NHS uses AI to treat patients, or the armed forces use it to keep the country safe, that data should remain in Britain.

A covenant for datacentres

The centrepiece for infrastructure is a new British datacentre covenant. Under it, datacentre operators will have to pass strict tests on investment in local communities, creation of local jobs and protection of local water supplies before they can win faster grid connections. In return, projects that meet the tests will get priority access to the electricity grid and permission to build on-site generation while they wait for a connection. The government presents the deal as a bargain: quicker connections in exchange for local consent and local benefit.

Why sovereignty is the argument

The move comes as the UK's datacentre pipeline has grown to 173 projects with more than 14 gigawatts of planned capacity, driven by demand for AI computing, while development in Scotland has been paused. Ministers argue that Britain cannot rely entirely on overseas computing power for its most sensitive work, and the wider package also includes an AI Challenge Prize for public services. Whether the covenant calms local opposition or simply adds a new hurdle for developers will only become clear when the first projects are tested against it.

Sources: GOV.UK Budget 2026, Computer Weekly, Computer Weekly datacentre report.