UK cloud market is not working, CMA warns

AWS and Microsoft hit back at ‘dominance’ claims

The UK’s Competition and Markets Authority (CMA) has provisionally concluded that competition in the £9 billion cloud services sector is not functioning effectively, potentially leading to higher costs, reduced innovation and weaker service quality for businesses across the country.

The findings, published by the CMA’s independent inquiry group, raise concerns over the dominance of Amazon Web Services (AWS) and Microsoft, which together hold up to 80% of UK cloud market share. The group has recommended that the CMA board consider launching a formal investigation under new digital markets powers granted by the Digital Markets, Competition and Consumers Act 2024.

A market dominated by two giants

The inquiry highlights several barriers to competition in the cloud sector, making it difficult for customers to switch providers or operate across multiple platforms. The majority of UK cloud spend is concentrated between AWS and Microsoft, while smaller rivals such as Google Cloud hold a significantly lower market share.

Customers face technical and commercial barriers that limit their ability to switch providers, potentially restricting their ability to adapt to evolving business needs. The capital investment required to enter and scale in the cloud market is substantial, discouraging competition.

Additionally, the CMA found that Microsoft’s licensing policies make it harder for AWS and Google to compete when offering cloud services that run Microsoft software.

Kip Meek, chair of the CMA’s independent inquiry group, stated: “Cloud services underpin most business operations, providing vital infrastructure to businesses and organisations across the UK economy. Our provisional view is that competition in this market is not working as well as it could be. So, we propose that the CMA considers investigating the largest cloud service providers using its new digital markets powers.”

Meek stressed that effective competition is essential for driving innovation, fair pricing and better service quality across the UK’s digital economy.

AWS has pushed back against the CMA’s conclusions, arguing that the intervention is unnecessary and could stifle innovation.

“The proposed intervention under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) is not warranted. The evidence demonstrates the IT services industry is highly competitive. Cloud computing has lowered costs for UK businesses with on-demand services and pay-as-you-go pricing, expanded product choice, and increased competition and innovation,” said an AWS spokesperson.

“We welcome the CMA’s updated finding that customer discounts do not harm competition. But we urge the CMA to carefully consider how regulatory intervention in other areas will stifle innovation and ultimately harm customers in the UK. We will continue to work constructively with the CMA as they work on their final report,” the statement concluded.

Dynamic cloud computing market

Microsoft also hit back, arguing that regulatory scrutiny is misplaced.

“The CMA should be focused on paving the way for the UK’s AI-powered future, not fixating on legacy products launched in the last century,” said Rima Alaily, Microsoft’s deputy general counsel.

“The cloud computing market has never been so dynamic and competitive, attracting billions in investments, new entrants, and rapid innovation.”

UK-based cloud providers, which have long called for greater regulatory oversight, welcomed the CMA’s intervention but expressed concerns that key issues remain unaddressed.

Mark Boost, CEO and co-founder of UK cloud firm Civo, said: “For years, hyperscalers have been allowed to stifle the cloud market with a host of anti-competitive practices. Today’s provisional decision from the CMA indicates a cautious step in the right direction.”

Boost, who is also a member of the Open Cloud Coalition (OCC), added that while the CMA’s recognition of licensing concerns is a positive step, the regulator has overlooked the impact of sky-high cloud credits, which he argues lock in customers and deter competition.

“It’s plain for all to see that hyperscalers’ licensing practices are anti-competitive. They can discourage users from seeking alternative platforms, lock them into paying unnecessarily high prices for features and capabilities that they do not want or use, and greatly limit interoperability.”

Boost warned that recent leadership changes at the CMA could influence the final decision, due by the statutory deadline of 4 August 2025.

What’s next?

The inquiry group will now consult on its provisional findings before making a final recommendation to the CMA board. If the CMA moves forward with a full investigation, AWS and Microsoft could face stricter regulation, including potential restrictions on their market behaviour and pricing practices.

The consultation period is open, with stakeholders encouraged to respond before the final decision is made in August.