The government also said there was “potential for more than 5,000 jobs and billions in private investment” in north-east England, which has been designated as a new “AI growth zone“.

Last year, the government announced a £10bn investment into a data centre to be built near Blyth, Northumberland.

It has now announced another data centre project dubbed Stargate UK from OpenAI, chipmaker Nvidia, semiconductor company Arm and AI infrastructure firm Nscale.

That will be based at Cobalt Park in Northumberland.

OpenAI boss Sam Altman said Stargate UK would “help accelerate scientific breakthroughs, improve productivity, and drive economic growth.”

However the UK version is a fraction of the firm’s US-based Stargate project, which OpenAI launched in January with a commitment to invest $500 billion over the next four years building new AI infrastructure for itself.

So far, reaction to the agreement has been broadly positive, but it is clear that there are many challenges ahead for the UK if it is to fulfil its intended potential.

The Tony Blair Institute described the news as a “breakthrough moment” but added that Britain had some work to do: “reforming planning rules, accelerating the delivery of clean energy projects, and building the necessary digital infrastructure for powering the country’s tech-enabled growth agenda,” said Dr Keegan McBride, the Tony Blair Institute for Global Change’s emerging tech and geopolitics expert.

Matthew Sinclair, UK director of the Computer & Communications Industry Association, hailed the agreement as “a powerful demonstration of the scale of the AI opportunity for the UK economy.”

But the Conservative Party highlighted that other big international companies such as the pharmaceutical giant Merck have recently cancelled or delayed their UK expansion plans.

Satya Nadella spoke to the BBC News in between board meetings, shortly before jumping on a flight to join Donald Trump as he arrives in the UK on a three-day state visit. Nadella will be among other tech leaders, including OpenAI’s Sam Altman and Nvidia’s Jensen Huang, attending the Royal state banquet on Wednesday.

He said he would use Microsoft’s AI tool Copilot to help him decide what to wear.

“I was very surprised that there was a very different dress protocol, which I’m really not sure that I’m ready for,” he said.