Overcoming regulatory obstacles in data storage facilities
In the last decade, the data centre industry has experienced a significant surge in valuation, funding, and capacity. However, this growth has been accompanied by a set of challenges, particularly in implementing pan-European asset-based securitisation structures due to varying tax obligations and disclosure regimes across jurisdictions in the European market.
As the industry evolves, operators and investors must navigate a complex regulatory landscape that encompasses energy use, data sovereignty, tariffs, merger control, foreign direct investment, foreign subsidies, anti-trust, securitization, and regulation.
Energy Use and Sustainability
Data centres with a power consumption of 500 kW or more in the EU will be required to report their annual energy and water consumption, as well as environmental performance metrics such as Power Usage Effectiveness (PUE), starting from 2024. Stricter PUE targets (≤1.3) will be imposed for new facilities from January 2025, with the expectation that all centres will comply by 2030. The EU aims to achieve climate-neutral data centres by 2030, necessitating stronger commitments to energy efficiency, renewable energy usage, water conservation, circular economy principles, and heat reuse.
Data Sovereignty and Data Protection
EU regulations mandate that EU citizen data must be stored within the EU or in countries with equivalent protections, due to GDPR. Post-Brexit, the UK is considered a "third country," requiring an EU adequacy decision for the free flow of personal data. The UK’s Data (Use and Access) Act 2025 modernises UK data law, aligning it closely with EU standards, enabling the EU to renew its adequacy decision, which allows seamless transfers of personal data from the EU to the UK without extra safeguards.
Tariffs and Trade Barriers
While not explicitly detailed, tariffs may arise due to Brexit-induced trade frictions between the UK and EU, affecting the import/export of data centre equipment and services and impacting cross-border operations.
Merger Control and Anti-trust
Regulatory frameworks in the UK and EU require scrutiny of mergers and acquisitions for competition concerns, especially involving large data centre operators or financing entities, to prevent anti-competitive market dominance.
Foreign Direct Investment (FDI) and Foreign Subsidies
Both the UK and EU have increased scrutiny on foreign investment in critical infrastructure like data centres to ensure security, economic sovereignty, and competitiveness. The EU has a foreign subsidies regulation, and the UK has strengthened its national security investment regime to screen foreign investments in sensitive sectors, including data centres.
Securitization and Financing Regulations
Financing of data centres must comply with financial regulations in each jurisdiction, including transparency obligations and anti-money laundering rules, ensuring lawful capital flows into data centre projects.
Regulation Complexity
Operators face layered compliance obligations, from GDPR/UK GDPR, environmental reporting mandates, national energy regulations, to sector-specific controls, requiring robust governance, transparency, and proactive adaptation to evolving laws in both regions.
In conclusion, energy performance and environmental sustainability reporting, strict data sovereignty and protection frameworks with ongoing UK-EU data adequacy negotiations, along with regulatory scrutiny on investments, mergers, and foreign involvement, constitute the principal challenges for data centre businesses in the UK and EU as of 2025. High tariffs and uncertainty create challenges for data centre operators, leading to increased costs for development and operation. The current tariff environment is impacting data centre supply chains and those of customers. The supply shortage for talent in the sector necessitates vigilance against anti-competitive agreements in the labour market.
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