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Britain will experience data center riches over the next decade – or so New Labor governments hope. Prime Minister Sir Keir Starmer is determined to “make the UK irresistible to AI companies looking to start, expand or grow their business”, and that means removing planning barriers to private sector investment in the physical infrastructure on which AI depends.
But something has puzzled me about the recent spate of data center project announcements: the sheer number of new jobs that seem to be involved. “More than 4,000 jobs will be created” by Blackstone’s £10bn investment in a Northumberland data center campus, the government has announced announced. Separate £14bn AI infrastructure investment by three tech firms ‘will create 13,250 jobs across the UK’, Starmer he said. wait. Data centers are full of machines, not people. Microsoft is e.g. he says each of the data center buildings employs about 50 people. So where do these big hiring forecasts come from?
Take the Northumberland project, which envisions 10 data centers built on land that was earmarked for the (failed) Britishvolt battery factory. According to planning documentsit is estimated that the development will require up to 40 people per data center. Once all 10 centers are built (expected by 2035), it will create 400 jobs, a tenth of the number stated by the government.
Planning documents say “peak monthly construction employment could be around 1,200 jobs” — these aren’t permanent roles, but there will likely be decades of construction work on site, so they aren’t transient jobs either. Despite this, operations and construction jobs together account for only 1,600 jobs. Where are the others?
Now we enter the darker realm of economic models. It is common practice to estimate the number of “indirect” and “induced” jobs created by a large investment. These are the jobs that will be created in the supply chain and as a result of new employees spending their money in local pubs, shops and so on. Planning documents for the Northumberland project say that one direct job at the data center can support between five and seven additional jobs in the local economy and related industries, which “could equate to an additional 2,000 to 2,800 jobs in the local economy once all ten data center buildings are operational”. Take 2400 as the middle and we reach the government figure of 4000.
It is reasonable to assume that there will be some spillover business, but the applied ‘multipliers’ are often modeled and can vary widely from sector to country. Blackstone told me that the multiplier listed in the planning documents was drawn from PwC research on the impact of data centers in the US, commissioned by the Data Center Coalition, an industry membership association.
Henry Overman, professor of economic geography at the London School of Economics, told me that academics tend to find smaller multipliers when they do subsequent empirical studies of what happened when new jobs arrived in an area. His study The impact of the BBC’s decision to move 1,700 mid- and high-skilled jobs to Salford in Greater Manchester between 2011 and 2012, for example, showed that each BBC job created an average of 0.33 extra jobs in the creative industries, which increased to 0.55 additional jobs by 2017. He and his colleagues found no significant effect on total employment.
None of this is to say that the project is not positive for Northumberland. But for the government, why cause public disillusionment or cynicism by lumping all these estimates into one big number, when you can treat people with respect and give them all the details from the start? An alternative might sound something like this: “This project will create a moderate number of skilled jobs and decades worth of construction work. It is likely to have wider local benefits as well, but it is difficult to give an exact figure.” Granted, it may not be attractive and stimulating, but I have a feeling that people these days aren’t in the mood for flashy boosterism anyway.
There are many good arguments for the economic importance of data centers (as well as concerns about energy and water use), but “they create tons of local jobs” is not one of them.
If Starmer wants to revive productivity growth as much as he says he wants to, he will have to relax his talk of expanding industries that produce high value without requiring large numbers of employees. For these new types of sectors, which are capital intensive but not labour-intensive, the Labor government needs to update its script.
