How to understand the ‘signals’ about data centres

Another technology related briefing today. What is the 'right political signal' about data centres and why? Because two stories today tell a different story, and understanding the gap between them is important.

The head of the lobbying body for Scotland's financial sector, including its equity investors and its legal deal making teams, says that the tone of discussion on data centres “sends the wrong signals”. The signal he is concerned it sends is that Scotland doesn't want “its” share of the global AI industry.

Elsewhere, we have a new analysis that should help us understand what it is that we would be getting a share of. A think tank has done an analysis of the claims of the main technology lobbying company in the UK and found them sorely wanting.

Tech UK is the hugely influential technology industry lobbying body which seemed to have authoring powers over Keir Starmer's government policy. It has made claims that about 40,000 jobs will be created by the currently-planned data centres in the UK, but this seems to be a gross overestimate.

The Verdant think tank has been able to identify only a quarter of that number being created by data centres so far. The numbers are pretty stark; Tech UK says 43.7 jobs will be created by each megawatt of electricity consumed by a data centre. The reality is that in fact only about 8.3 permanent jobs are really being created per megawatt consumed.

And that is almost certainly an overestimate of the future. The current generation of data centres are comparatively small and the best estimates are that the new generation of data centres are likely to create only 1.6 permanent jobs per megawatt of electricity consumed.

But 'megawatt' of electricity may not be intuitive to many people so is creating one and and a half jobs per megawatt good value? Well one megawatt of electricity is enough to power up to about 1,000 houses permanently. One thousand households kept powered or one cleaning job? Those are the trade-offs being considered.

So let's get back to 'Scotland's share'. What do we get a share of? The reason that Tech UK is inflating job numbers is presumably because even its unrealistic estimates represent a very low return on jobs for the cash, electricity and water inputs. This is not an industry that converts investment into jobs efficiently.

And the ownership of these is almost all constructed from private equity, which effectively means more overseas ownership of the Scottish economy and a redirection of enormous amounts of national resources into an industry with no domestic supply chains, no physical outputs, no Scottish character (no-one in the world will know their AI was powered by Scottish data centres any more than you know where the data centre that is storing this website is).

So who benefits? Three groups. There are the equity investors themselves who will make a fortune out of Scotland and export almost all of it – but with next to no spill-over into our economy. We just give them our energy and land and water and they take all our money away.

Secondly, the local deal orchestrators make some money. This is really an elevated property deal – the local partner applies for and negotiates for planning permission and finds a partner who wants data centre capacity and offers them a building with energy and water. It is little more than any other property deal with almost no benefit to anyone other than the property speculator.

Third, there is Edinburgh's legal and consultancy sector who do all the deal negotiating, legal paperwork and so on. They now appear to have formed an entire industry that breaks up Scottish asserts and sells them on the cheap to investors from the US or Gulf States.

That is the signal that Scotland's financial sector is worried about, the signal that national policy might ever not be run mainly in the interests of the wealthiest one per cent. Restricting data centres on behalf of citizens will do very little to dampen Scotland's real economy and the economic investment could be used instead for the purpose of creating jobs for ordinary people, not destroying them.

It may be unfashionable to say it, but data centres are class war being fought by the one per cent – they want Scotland's infrastructure taken away from its citizens and given to tech bros so the financial sector can negotiate the deal. In this class war, the signal Scottish Financial Enterprise want to see from the 99 per cent of people in this country is a white flag. We have no incentive whatsoever to go along with that.