The Stargate UK project has been put on hold by the ChatGPT manufacturer amid concerns about high energy costs and regulation.
The deal included a large data centre in north-east England and making thousands of chips for AI development available in a partnership with tech companies Nvidia and Nscale.
The agreement formed part of a wider £31 billion package of UK tech investment, which had been hailed as a sign of Britain's potential to become an "AI superpower".
However, an OpenAI spokesperson declared on Thursday (09.04.26) that it will only proceed with Stargate UK when the "right conditions" could "enable long-term infrastructure investment".
They said in a statement: "We see huge potential for the UK's AI future. London is home to our largest international research hub, and we support the government's ambition to be an AI leader.
"AI compute is foundational to that goal - we continue to explore Stargate UK and will move forward when the right conditions such as regulation and the cost of energy enable long-term infrastructure investment."
OpenAI said when announcing the data centre last September that it would help strengthen the UK's "sovereign compute capabilities" and enhance its native AI development.
The firm wrote at the time: "This will help power the UK's future economy, boost its global competitiveness and deliver on the country's national AI Opportunities Action Plan."
Stargate UK - based at Cobalt Park in North Tyneside - was far smaller than OpenAI's US-based Stargate project, which committed a $500 billion investment over four years to build new AI infrastructure.
However, the announcement will still come as a blow to the UK Government - which has proposed home-grown tech and AI development as a method of improving economic growth.
A government spokesperson explained that Britain's AI sector had attracted over £100 billion in private investment since the Labour administration came to power in 2024, and that this was delivering jobs and opportunities for workers.
They said: "Our focus is on continuing to create the right conditions for investment in the UK's AI and data centre infrastructure.
"We are continuing to work with OpenAI and other leading AI companies to strengthen UK compute capacity."
