Investment - Articles - Budget 2026 and the Data Centre Covenant

This was clearest in the announcement on data centres, where the Data Centre Covenant links government support to clean power, environmental reporting and local benefits. Strategic projects will receive help securing grid capacity and “exceptionally strategic” projects may generate energy on-site while awaiting grid capacity. This signals that environmental, social and governance (ESG) considerations and local community benefits are important, but some compromise for “strategic” projects is allowed.

 

“A similar pattern can be seen in the additional capital provided to the National Wealth Fund. £2 billion was earmarked for a new Energy Wealth Fund, but this was matched by roughly equivalent spending cuts to home energy efficiency, hydrogen and carbon capture programmes. There is also a new requirement to procure clean power only where it lowers bills overall and can connect to the grid. Great British Energy retained its budget, while the new Energy Wealth Fund was tied to future North Sea revenues.

 

“Taken together, these measures suggest that projects offering the clearest commercial returns or greatest strategic value may be prioritised over those with important environmental or social benefits but weaker revenue streams. The Government hopes this approach will unlock further private capital. For responsible investors, however, this increases the importance of assessing whether individual projects align with their priorities and monitoring whether investments continue to deliver the environmental, social and local benefits expected at the outset.

 

“That focus should also extend beyond individual projects and companies to the policies shaping the market. The Budget’s proposed protections for communities hosting data centres, alongside expectations that developments provide local benefits, are relevant to the growing attention UK pension schemes are giving to the local impacts of infrastructure development. The consultation on the Draft National Policy Statement for Data Centres therefore provides a timely opportunity for investors to engage on how environmental effects, community interests and local benefits should be assessed as development expands.”