ChatGPT developer OpenAI has halted plans for a significant UK data centre project, citing high energy costs and regulatory challenges as barriers to investment.

The US technology giant had intended to establish its “Stargate” data centre initiative within a new artificial intelligence growth zone in the north-east of England.

The venture was slated for multiple sites, including Cobalt Park near Newcastle and Blyth.

However, OpenAI said the plans are now on hold, awaiting “the right conditions” to facilitate long-term infrastructure investment across the UK.

A spokesman for OpenAI said: “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.”

The reference to energy costs come at a time when prices are being pushed higher by the US and Israel’s war with Iran.

The International Monetary Fund (IMF) said in March that the UK was one of the nations particularly exposed to soaring wholesale costs because of its reliance on gas-fired power, as opposed to sources such as nuclear and renewable energy.

Data centres are powered by very large amounts of energy so are more likely to be exposed to volatile prices.

OpenAI added: “In the meantime, we are investing in talent and expanding our local presence, while also delivering on the commitments under our MOU (memorandum of understanding) with the Government to adopt frontier AI in UK public services.”

Its Stargate project aims to invest billions of dollars into AI infrastructure in the US, with funding from OpenAI, SoftBank, Oracle and MGX and partnering with tech giants including Nvidia and Microsoft.

Building it into the UK came as part of a landmark tech deal between Britain and the US, announced last September amid President Donald Trump’s second state visit.

The deal also included a 30 billion US dollar (£22.3 billion) pledge from Microsoft, the largest ever made by the company in the UK, to fund the expansion of Britain’s AI infrastructure.

Conservative MP and shadow science minister Ben Spencer said: “When global firms cite high energy costs and regulatory uncertainty as reasons to walk away, it tells you everything about the direction of travel.

“For too long, Labour have prioritised courting big tech headlines while neglecting our domestic start-ups, but also the fundamentals that actually attract investment at home.”