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Microsoft to open first UK data centres for cloud computing business

Satya Nadella announces expansion amid competition from Amazon and growing scrutiny of personal data storage

Microsoft Head Office Campus in Redmond
Microsoft is opening a cloud data centre in the UK Credit: Photo: ALAMY

Microsoft has announced a major investment in UK data centres that will allow the software giant to offer its cloud computing service from Britain for the first time.

The company plans to build two centres in the UK next year, its chief executive Satya Nadella announced at the Future Decoded conference hosted by Microsoft on Tuesday.

The investment, worth hundreds of millions of pounds, will allow the businesses and government bodies that use Microsoft’s online computing services, Azure and Office 365, to ensure data about customers and citizens is kept in the UK. Previously, businesses would have applications powered by data centres in Ireland or the Netherlands.

Microsoft’s move comes amid growing international scrutiny of data practices and the European Court of Justice’s recent decision to invalidate “Safe Harbour”, a transatlantic treaty that had allowed the unfettered transfer of personal data from the EU to the US.

Microsoft, Amazon and Google are directly competing around the world to sell on-demand cloud services, which allow businesses to outsource functions such as data storage and IT software without upfront hardware costs. The market is estimated to be worth £3.4bn in the UK alone and growing rapidly.

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Microsoft's cloud data centre in Dublin

Amazon announced last week that it planned to build data centres for its cloud computing business in the UK. Liam Maxwell, the Government’s chief technology officer, said the two companies were investing $3bn (£2bn) between them. Microsoft has invested more than $2bn in cloud infrastructure across Europe.

Mr Maxwell said the Government spends more than £1bn on data centre hosting because data protection rules force it to keep some personal data in the country, and that Microsoft and Amazon building UK data centres would help it save “a lot of money” by outsourcing operations.

Scott Guthrie, the head of Microsoft’s cloud and enterprise division, said the decision to open data centres in the UK was not a response to the Safe Harbour treaty being scrapped, but that “data residency” is an increasingly important issue.

He said one data centre was likely to be built near London, with another on the other side of the country, and that Microsoft now has data centres in twice as many territories as Amazon and Google combined.