Investment in the UK's digital infrastructure reached £11.2 billion in 2025.

      Last year, British companies invested £11.2bn in digital infrastructure, approximately three times the amount reported by official figures. The increase in investment in UK digital assets was not due to a surge in construction activity. Most of the discrepancy arises from a change in the Office for National Statistics (ONS) methodology.

      The ONS revised its approach on Monday, with its primary measure now accounting for investments in telecommunications infrastructure. Thus, digital infrastructure investment was reported at £3.6bn for 2025. The broadened measure incorporates data center buildings, hardware, network software, and radio spectrum licenses, resulting in the £11.2bn figure. The ONS clarified that they are not recognizing new investment beyond existing capital data; rather, they have classified a larger portion of existing assets as part of the infrastructure.

      In terms of investment trends, there was a decrease of £0.5bn, or 4.0%, compared to 2024. Despite this drop, it remains the third highest since 1997. However, the trend in the previous years showed growth, with investment in 2023 rising 51% compared to 2019 levels, while overall UK business investment grew by 19% in the same period.

      Investment was primarily concentrated in two asset categories in 2025, comprising 84% of the total. The largest share, £5.6bn, was allocated to other buildings and structures, which includes data centers, fiber optics, and base stations, showing an 83.8% increase since the start of the COVID-19 pandemic. The second category, software and databases, accounted for £3.8bn, representing a near 95% growth since 2021, making up a third of the total.

      Conversely, hardware had experienced a long-term decline, but in 2025 it saw a significant increase of 54.6%, or £0.3bn, reaching £0.7bn, its highest level since 2006. The ONS attributes this growth to the expansion of data centers to support cloud computing and AI.

      The previous measurement method did not adequately capture data centers, as they comprise multiple components, including structures, hardware, and software. The old approach focused on telecom structures, and therefore overlooked the broader aspects of data processing and hosting. The ONS once considered including publishing and broadcasting but ultimately excluded them as they produce content instead of infrastructure.

      The government has already reclassified data centers as Critical National Infrastructure in 2024, alongside energy and water services. Hyperscale data centers, built by large technology firms for their own use, represented about 63% of data center development in 2025.

      There has been a notable increase in AI adoption among UK companies with ten or more employees, rising from approximately 12% in late 2023 to 35% this year, according to the ONS survey. Furthermore, around 69% of businesses were using cloud systems in 2023, which are essential for AI operations. Between 2000 and 2024, the number of UK data centers increased by more than 400%, as reported by Tom Rees for Bloomberg.

      The pipeline for data center projects is substantial, with Barbour ABI listing 171 construction endeavors that either commenced in the previous year or are anticipated to begin within the next five years. Industry projections estimate UK data center investment could reach £10bn annually by 2029, with the current annual investment at £1.75bn.

      Government funding has remained a small and rapidly growing component of the market, with grants supporting 5.7% of digital infrastructure investment in 2024, valued at £0.7bn, up from £0.2bn in 2023. Over the entire span from 1995 to 2024, grants totaled £3.7bn, compared to £0.5bn spent by the government on its own communications assets. The majority of funding comes from the private sector, which invested £11.6bn in 2024, with £11.0bn covered by its own resources. Telecom operators contributed significantly, with Ofcom estimating their fixed network expenditure at £6.8bn in 2024, 77% of which went towards full fiber access.

      Project Gigabit, a £5bn initiative, allocated £2bn between 2020 and 2025, with nationwide gigabit coverage pushed from 2030 to 2032 in light of the 2025 spending review.

      Power supply constraints may limit AI deployment, as warned by Andrew Bailey, Governor of the Bank of England. He highlighted energy capacity shortages as a barrier to widespread adoption across sectors, a situation evidenced by an Essex data center waiting for grid connection and warnings from the water industry about supply issues. This energy squeeze is redirecting capital elsewhere, with Southeast Asia planning substantial increases in data center capacity.

      Despite these challenges, investment commitments in AI have been made public