Blog: UK Data Center Market Continues to Grow Despite Brexit Worry – Data Center Knowledge

Katharine Gemmell (Bloomberg) – Fears the U.K.’s data center operators would shift their infrastructure abroad because of Brexit are looking unfounded, with several firms and industry experts saying they’ve seen domestic growth since 2016.

London’s data center market had a total supply of 711 megawatts during the second quarter of 2020 and is expected to end the year with 67 additional megawatts of capacity than the year before, according to data compiled by CBRE Group Inc.

Related: Continental Drift: Is Digital Sovereignty Splitting Global Data Centers?

The industry saw record expansion in 2019 when 145 megawatts of capacity was added. Limited construction and site access for upgrades during the pandemic this year has been blamed in part for the recent slowdown.

Concerns that companies may relocate from the U.K. to Europe heightened last year after one of Britain’s biggest gambling companies, GVC Holdings Plc, moved the servers hosting its online betting platforms to Ireland.

At the time, a spokesperson for industry lobby group U.K. Finance also sounded the alarm that banks were considering relocation to avoid problematic cross-border transfers of personal data. Movement of data generates 174 billion pounds ($216 billion) of value in the U.K., according to the Confederation of British Industry.

Emma Fryer, associate director of data centers at industry body TechUK, said the reality has been less dramatic.

“The market has been very buoyant, with record levels of construction, record uptake of space and record size contracts,” she said. TechUK estimates that a typical modern data center can cost more than 100 million pounds to build and fit out.

Synergy Research Group Chief Analyst John Dinsdale said that over the next five years “the number of operational hyperscale data centers in Europe will grow at eight to 10% per year and we expect U.K. growth to be in the same range.”

Dinsdale said these so-called hyperscale sites include those owned and operated by the biggest cloud-computing providers in the U.K., such as Microsoft Corp., Amazon.com Inc. and Alphabet Inc.’s Google. They, along with their peers, now have 26 major facilities in the U.K., up from 14 in 2016 prior to the Brexit referendum, he said.

Demand for U.K.-based sites has been driven by enterprise cloud and software-as-a-service utilities — such as office productivity and file storage — as well as e-commerce, social networking, search, streaming video services, gaming and mobile apps.

Dinsdale said the U.K. has also remained the largest market in Europe for colocation data centers, a less costly alternative to expensive dedicated premises. These facilities lease shared space in purpose-built warehouses to multiple third-parties and provide the technology to run it. The four largest colocation markets in Europe are known as FLAP — an acronym of Frankfurt, London, Amsterdam and Paris.

“The U.K. is by far the largest colocation market in Europe, a long way ahead of Germany, which is itself a long way ahead of France and the Netherlands,” Dinsdale said. “Brexit has had an impact, but it was somewhat muted in relation to the bigger story of aggressive growth in cloud and cloud-supported services.”

Ireland — and Dublin in particular — is proving competitive, however, with some of the industry now calling the leading colocation centers FLAP-D. Amazon, Google and Microsoft all have operations in Ireland.

Compared to emerging markets for data centers, Dublin is well ahead in terms of build activity from the hyperscalers, driven by taxation benefits, its “ideal position” to bridge Europe and the U.K., as well as its subsea cable access to the U.S., the CBRE report’s authors concluded.

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