The global technology giants use hyperscale data centres. Around 70% of these are leased from third-party operators and this has stimulated major investment and growth. Vantage Data Centers acquired NGD in July 2020 and in March 2021 was granted planning permission to build a two-storey data centre at the Newport subsidiary, a 24,000 sq m facility with 10 data halls to be occupied by a single customer. NGD had already applied to build four three-storey data centres on space behind the existing data centre and permission had been granted for that in September 2020.

COVID-19 has accelerated the development of online activity, and data centres are having to adapt to growth rates far in excess of those anticipated prior to the pandemic. This is generating new opportunities and with companies increasingly adopting a multi-cloud architecture, those opportunities extend to all levels of the colocation sector.

Challenges include the ever stringent requirements to reduce emissions in a sector with a voracious appetite for power. At the same time the sector is increasingly adopting automation itself to address staffing shortages, a further issue impacted by COVID-19 and the impact of social distancing and employee health and safety.

Edge computing provides the next stimulus to development with the internet of things and 5G foremost amid the insatiable growth of data being created. Nonetheless, the sector is highly attractive to investors with data centre earnings before interest, taxes, depreciation and amortisation (EBITDA) margins being strong (reported to be at about 43%).

• How COVID-19 has forced the data centre industry to adapt to an even faster-growing online demand.

• Why third-party provision is proving attractive to customers.

• The huge hyperscale investments being made.

• Why the sector is highly investible for venture capitalists.

• Why edge computing will attract huge investment.

• How colocation sits alongside hyperscale development.

The first COVID-19 cases were confirmed in the UK at the end of January 2020, with a small number of cases in February. Rapidly rising case numbers led to the first national lockdown, starting on 23 March. It wasn't until 15 June that non-essential stores were allowed to reopen, followed by pubs, restaurants, hotels and hairdressers on 4 July and many beauty businesses on 13 July.

By September, it had become clear that the UK was at the start of a second wave, and social distancing measures were intensified. Continued increases in infection numbers led to Wales implementing a two-week national lockdown from 19 October, England announcing a month-long lockdown from 5 November and Scotland introducing a new five-level system of coronavirus restrictions.

Despite these restrictions, however, case numbers continued to increase. All four UK nations tightened restrictions further in January 2021, effectively leading to a full UK-wide lockdown.

On 22 February, Boris Johnson announced the roadmap to an easing of restrictions in England, starting with the reopening of schools on 8 March, followed by easing of restrictions on outdoor gatherings on 29 March and with a hoped end to all restrictions by 21 June. The Welsh and Scottish governments also gave more details on their plans to ease restrictions, with both nations taking a slightly more cautious approach to the one planned for England.

The UK’s vaccination programme started on 8 December 2020, and with the Pfizer-BioNTech, Moderna and Oxford-AstraZeneca vaccines licensed for use in the UK, the government aimed to offer a first dose of the vaccine to 32 million people by mid-April and by 25 May had given a first dose to almost 38.2 million adults (72.5% of the adult population) and a second dose to 23.2 million people (44% of the adult population). This in turn has enabled the roadmap to be followed and, in some areas, exceeded despite some growth in positive tests partially arising from the Indian variant.

Mintel’s economic assumptions are based on the Office for Budget Responsibility’s central scenario included in its March 2021 Economic and Fiscal Outlook report. After the fall of 9.9% over the course of 2020, the scenario suggests that UK GDP will grow by 4% in 2021 and 7.3% in 2022.

GDP isn’t expected to return to pre-COVID-19 levels until Q2 2022, although this is six months earlier than the OBR forecast in November 2020, mainly because of the faster-than-expected rollout of vaccines.

Unemployment is expected to peak at 6.5% in Q4 2021. As with GDP, this is more positive than the OBR’s November forecast, but the OBR does raise the prospect of long-term scarring on employment, especially in the more exposed retail and hospitality sectors.

Social distancing measures have been progressively eased since April 2021. Nonetheless the government guidelines as at the end of May remain that employees should work from home if possible, though the ultimate decision now rests with employers.

For the purposes of this Report, MBD has used the following definitions:

A data centre (sometimes spelled datacentre) is a centralised repository, either physical or virtual, for the storage, management and dissemination of data and information organised around a particular body of knowledge or pertaining to a particular business. A data centre is a dedicated space where companies can keep and operate most of the ICT infrastructure that supports their business, including the servers and storage equipment that run application software, and process and store data and content. For some companies, it might be a simple cage or rack of equipment. For others it could be a room housing a few or many cabinets, depending on the scale of operation.

The space will typically have a raised floor with cabling ducts running underneath to feed power to the cabinets and carry the cables that connect the cabinets together.

The environment is controlled in areas such as temperature and humidity to ensure both the performance and operational integrity of systems. Facilities generally include power supplies, backup power, chillers, cabling, fire and water detection systems and security controls.

Data centres can be in-house, located in a company’s own facility, or outsourced with equipment collocated at a third-party site. Outsourcing does not necessarily mean relinquishing control of equipment; it can include a facility to house that equipment.

A private data centre may exist within an organisation's facilities and be maintained as a specialised facility. Under such a definition virtually every organisation has a data centre, although it might be referred to as a server room or a computer closet. This Report is concerned with centres that are used for rental to other companies. These are typically referred to as a colocation centre (also spelled co-location, or colo). In this definition the data centre has equipment, space and bandwidth available for rental to customers.

All values quoted in this Report are at current prices unless otherwise specified.

The term billion refers to 1,000 million.

It is also expedient to identify the terminology of data sizes:

• 1,000 megabytes = 1 gigabyte

• 1,000 gigabytes = 1 terabyte

• 1,000 terabytes = 1 petabyte

• 1,000 petabytes = 1 exabyte

• 1,000 exabytes = 1 zettabyte.