I’m having the same issue. I did some clicking and found that within the output instance dropdown off to the right of the tabs (Problems, Output, Debug Console …), you can select Verse Language Server, VerseWorkflow, and VerseEXT.
After clicking those I found
VerseEXT → Verse Language Server executable C:\Users\USER_NAME_HERE\AppData\Local\Temp\verse-lsp-17028.exe is now active!
Verse Workflow → Attempting to connect to VerseWorkflowServer on 127.0.0.1:1962. Connected to VerseWorkflowServer!
My guess would be that, whatever the Verse Language Server output is written by, is trying to connect to the LSP (file that VerseEXT output is talking about) before the LSP file is executed. Not sure how to put a band-aid on it for now but I’ll post an update here if I find out how.
basically a small bare bones Microsoft instantly fixed the issue for me (confirm that it is microsoft.com and not another source). Once installed, just close and reopen VS Code, no need to restart UEFN.