Green Light for Growth: Planning Reforms Can Drive Data Centre Development

Good things often come in threes – and, for the data centre industry, the latter half of 2024 has delivered significant planning changes that will support the further growth of this fast-moving sector:

1. A Critical National Infrastructure (CNI) designation for data centres.
2. The granting of planning permission by the Secretary of State (SoS) for the development of a data centre at Court Lane Industrial Estate.
3. The introduction of explicit policy support for the development of data centres in the new National Planning Policy Framework (NPPF) in both plan-making and decision-taking.

The absence of any specific planning policy for data centres at a national level has been a barrier to obtaining permission for schemes across the London Region. This has resulted in a number ending up at appeal following refusal by the Local Planning Authority (LPA).

Since the change of Government in July 2024, the SoS for Housing, Communities & Local Government has recovered three data centre appeals, all of which experienced similar issues in obtaining a positive determination at a local level.

Together with proposals at Abbots Langley (on which Montagu Evans is advising), Court Lane Industrial Estate was one of two data centre appeals recovered by the SoS in July 2024. A third, at the former Woodlands Park Landfill site, was recovered in October 2024.

Court Lane is previously developed land in the Green Belt of Buckinghamshire – or Grey Belt, as now formally defined by the new NPPF. In her decision issued on the Court Lane appeal on 6 December, the SoS concluded that the need for data centres, combined with the positive benefits that the Court Lane scheme would deliver, constituted ‘very special circumstances’, thereby justifying the development of the data centre in the Green Belt.

These events are all in the context of the government repeatedly insisting that economic growth is its highest priority and that data centres are to be engines of that economic growth.

Impact of the new NPPF

Now, the importance of data centres to economic success is set in policy, with the NPPF updated (and representations on data centres making up the third highest topic of consultation responses).

In Chapter 6, there is now a national policy requirement for LPAs to “recognise and address the specific locational requirements” of data centres when making decisions on planning applications. Paragraph 87 states that:

“This includes making provision for clusters or networks of knowledge and data-driven, creative or high technology industries and for new, expanded or upgraded facilities and infrastructure that are needed to support the growth of these industries (including data centres and grid connections).”

Although there is ambiguity in the language used in Paragraph 87, taken together, the designation of data centres as CNI in September 2024 and the publication of the NPPF send a clear message to LPAs that, from now on, significant weight must be attributed to the need for new data centres and their unique locational requirements when planning applications are considered.

The NPPF has also introduced policy support for plan-making. As detailed in Paragraph 86 of NPPF, LPAs are now required to draft planning policies that:

“Pay particular regard to facilitating development to meet the needs of a modern economy, including by identifying suitable locations for uses such as laboratories, gigafactories, data centres, digital infrastructure, freight and logistics.”

Data centres can serve various functions, each with specific locational requirements. For cloud computing, this has manifested itself as Availability Zones, with West London and the Docklands being the primary locations and ones which remain the most attractive and certain for investors, with other established zones also growing and others still, like Manchester, emerging.

As the industry transitions towards the ‘hyper-scale’ model of provision – driven by scalability, energy efficiency and sustainability – there has been an increasing number of planning applications for data centres on Green Belt in and around Greater London. These locations can offer significantly larger land parcels for development compared with urban areas whilst also providing necessary access to the region’s established fibre and power networks. It is now recognised that there is an overwhelming and urgent need to provide the necessary data centre capacity in these Availability Zones, and therefore, we anticipate that the relevant Boroughs will need to plan for their data centre needs and expect more growth in this sector. This will be in addition to their more traditional industrial/logistics and wider commercial development, which have their own requirements and growth trajectories.

In addition to the specific policies for data centre development contained within Chapter 6, the NPPF now includes policy support for “commercial and other development” in the Green Belt in Chapter 13, which would also apply to data centres. As per Paragraph 155, data centre development will not be considered inappropriate development in the Green Belt subject to:

• Utilising grey belt land and not fundamentally undermining the purposes (taken together) of the remaining Green Belt across the area of the relevant Plan;
• Demonstrating the unmet need for data centre development and;

• Being sited in a “sustainable location”, with particular reference to paragraphs 110 and 115 of the NPPF.

The NPPF also clarifies that the ‘Golden Rules’ introduced will apply only to residential development in the Green Belt and not to data centres. This distinction offers additional flexibility for the market, as there is no national policy requirement for data centres to provide publicly accessible green spaces. However, data centre developments must still achieve a minimum 10% net gain in biodiversity, as per the requirements of the Environment Act (2021).

Supporting London-wide growth

The London Region remains the pre-eminent location for data centre developers in Europe, although, in 2023, Frankfurt was surpassed in bringing forward new data centre capacity. Addressing the conflict that currently exists between the chronic under-supply and growing demand for capacity is critical to London maintaining its leading market position and globally important role. Indeed, in her decision on Court Lane, the SoS recognised that failure to meet the growing need for data centres in London “could have a significant negative consequence for the UK digital economy”.

In the immediate term, our hope for the industry (and the continued success of the London Region) is that the publication of the NPPF will result in planning permissions being granted for data centres in quicker timeframes and with decisions made quickly at a local level – thereby avoiding data centres, as CNI, getting ‘stuck’ in the appeals process.

Alongside the new NPPF, the government has also confirmed proposals to include data centres (as well as laboratories and gigafactories) as Nationally Significant Infrastructure Projects (NSIPs), a streamlined consenting process for large-scale infrastructure schemes. Although there are no timescales for the legislative changes, our understanding is that these will likely come forward as part of the Planning and Infrastructure Bill, due early next year.

We fully support any measures that will ensure there is a well-resourced, efficient and market-oriented consenting route as part of the overall planning process that is available to support the delivery of data centres and provide certainty to international investors that UK plc is open for business and will respond quickly to capture the investment.