A multibillion-pound initiative to integrate artificial intelligence into the core of the British economy has come under scrutiny following revelations of potential “phantom investments” and questionable accounting practices, as highlighted by a recent investigation from The Guardian.
Since 2024, both Conservative and Labour governments have boasted substantial deals aimed at building new datacentres, creating thousands of jobs, and constructing a high-performance supercomputer. These investments, primarily led by firms linked to tech giant Nvidia, have been celebrated as central to the government’s commitment to harnessing technology for economic growth.
On Monday, the appointment of former UK Deputy Prime Minister Sir Nick Clegg and former Meta COO Sheryl Sandberg to the board of NScale, one of the involved firms, was announced. NScale claims to have completed a $2bn funding round, propelling its valuation to an impressive $14.6bn.
However, the investigation suggests that many claims may lack substance. Allegations have surfaced that the money may not be firmly committed, the promised datacentres could already exist, and that job creation figures remain unverified—while the so-called supercomputer site is still functioning as a scaffolding yard just 12 miles north of London.
When approached for clarification on these investments, the UK’s Department for Science, Innovation and Technology (DSIT) declined to provide specific answers but rejected the claims. A statement asserted that “our AI sector has attracted more than £100bn in private investment” since taking office, highlighting a growth rate 23 times faster than the rest of the economy last year and claiming it generates much-needed jobs.
Despite this bold assertion, the DSIT acknowledged limitations in its oversight of these developments. In one notable instance, it confirmed that a purported £1.9bn investment had no formal contract in place, even though announcements suggested otherwise. In another case, it conceded that it was “not playing an active role in auditing” these commitments.
The findings are particularly disconcerting when considering the global landscape, where over £500bn is projected to be invested by 2025 as nations pursue economic uplift through AI. Last year, UK Prime Minister Keir Starmer forecasted that full integration of AI could inject £47bn annually into the economy, advocating for its “mainlining” into the UK’s economic framework. Yet, the situation in the UK raises fears that, without stringent oversight, such investments may primarily benefit corporations and investors based in the US.
“These are phantom investments,” said Cecilia Rikap, an economics professor at University College London. “Big tech companies often inflate the positive impacts of their datacentre jobs to appease governments eager to showcase economic growth.”
Concerns Over Investment Validity
The UK government’s AI ambitions revolve around two companies that are heavily invested by the $4tn tech giant Nvidia: London-based NScale and US firm CoreWeave. In 2024, then-Prime Minister Rishi Sunak proudly announced a £1bn commitment from CoreWeave to reinforce the UK’s position in the AI landscape.
While CoreWeave’s announcement implied that it would establish two new datacentres in the UK, further investigation reveals that these facilities were already operational—one in London Docklands and another in Crawley. Planning records indicate that no new construction occurred; rather, CoreWeave is leasing existing space in facilities built as far back as 2002.
This essentially means CoreWeave’s reported investment primarily involved relocating computing capacity from the United States into an existing site—an action rather than a true investment into UK infrastructure.
“The rules are very flexible,” Rikap added, emphasizing that it’s common for datacentre developers to present equipment purchases as new investments. This flexibility appears to be exploited, enabling the government to claim positive economic developments that might not reflect reality.
In response to inquiries, the government confirmed that its figures for CoreWeave’s investment did not originate from them and merely reflected CoreWeave’s statements. It declined to clarify whether these investments constituted capital expenditures or equipment procurement.
NScale’s ambition includes a supercomputer facility on the outskirts of Loughton, touted as the largest sovereign AI datacentre in the UK. Yet, as of February, that site was still being utilized as a scaffolding yard. NScale has since submitted a planning application to build there but remains unclear about their ownership status and specific timelines for development.
Jobs and Infrastructure Developments
Both NScale and CoreWeave have promised significant job creation and infrastructure expansion as part of their initiatives. While NScale is linked to the ambitious Stargate UK project, aimed at developing AI facilities across the nation, details on actual job creation remain elusive. The government maintains that the NScale project is part of its $2.5bn investment in the UK, though specifics on the financial breakdown and auditing mechanisms are noticeably lacking.
In Scotland, CoreWeave’s proposal for an AI growth zone in Lanarkshire has received governmental endorsement, promising 3,400 new jobs linked to the development of a datacentre. However, critics question the viability of these promises, particularly the ambitious goal of generating 1GW of onsite renewable energy, pointing out that current capabilities are much lower.
“These claims are pie-in-the-sky,” asserted Dr. Kat Jones, director of a countryside charity in Scotland, voicing skepticism about the feasibility of providing such massive renewable energy outputs.
Through this lens, the British government’s AI aspirations—marketed as critical to the nation’s economic future—face growing scrutiny, raises questions about the integrity of these investments, and highlights the necessity for clearer oversight and accountability measures to ensure that genuine economic benefits are realized.
