UK cloud sector faces scrutiny over competition concerns

LONDON - The UK's Competition and Markets Authority (CMA) has released provisional findings from an independent inquiry group, suggesting that competition in the country's £9 billion cloud services market may be inadequate. The report, published today, raises concerns that the current market conditions could be leading to increased costs, reduced choice and innovation, and lower quality services for UK businesses and organizations.

The inquiry highlights that customers often face limited options, with Amazon (NASDAQ:AMZN) Web Services (AWS) and Microsoft (NASDAQ:MSFT) holding up to 40% each of the UK's cloud services spend. Google (NASDAQ:GOOGL) is noted as the next largest provider but with a significantly smaller market share. The group found that technical and commercial barriers hinder customers from switching providers or using multiple services, potentially locking them into suboptimal choices.

The CMA's provisional findings also point to substantial barriers to market entry and expansion, citing the considerable capital investment required to supply cloud services. The report suggests that Microsoft's dominant position in software may be making it more challenging for AWS and Google to compete effectively, thereby reducing the competitive pressure in the cloud services market.

In light of these provisional findings, the inquiry group recommends that the CMA consider using its new powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) to investigate AWS and Microsoft for potential strategic market status (SMS) designation. This would allow the CMA to take a more targeted and flexible approach to potential remedies.

Kip Meek, chair of the CMA's independent inquiry group, emphasized the importance of cloud services as a critical infrastructure for UK businesses, advocating for effective competition to drive benefits such as choice, quality, and competitive pricing.

The CMA will now seek consultation on these provisional findings and recommendations, with a final decision expected by August 4, 2025. The full provisional findings report will be available on the case page in due course, outlining potential interventions to address market-wide concerns, which may include promoting technical standardization and ensuring fair software licensing.

The investigation into the cloud services market was initiated following a referral from Ofcom, which had conducted a market study on the sector. The CMA's inquiry focused on features such as egress fees, technical barriers, and committed spend discounts, with provisional conclusions that egress fees and technical barriers are detrimental to competition.

This article is based on a press release statement from the CMA, detailing the provisional findings of their independent inquiry group into the UK's cloud services market.

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