CMA Must Act Now to Fix Britain’s Broken Cloud Market
Last summer, following an exhaustive investigation, the Competition and Markets Authority (CMA) conclusively diagnosed the UK's cloud market as broken and dysfunctional. The regulator identified alarming levels of market concentration, significant barriers to switching providers, and restrictive software licensing practices that severely limit effective competition. Yet, seven months later, decisive action remains conspicuously absent.
Regulatory Decision Looming Amid Growing Concerns
The CMA board is expected to decide by the end of March whether to launch formal investigations into Amazon Web Services (AWS) and Microsoft Azure under the UK's new digital markets regime. This decision will come more than two-and-a-half years after the watchdog first began examining competition concerns in cloud services. For a market that underpins nearly every facet of the modern economy, this delay is critically prolonged.
Cloud computing is not merely another technological advancement; it is the foundational infrastructure upon which AI systems operate, public services function, and critical national infrastructure depends. Sectors such as finance, healthcare, defence, retail, and transport all rely heavily on cloud platforms. When cloud markets are highly concentrated and structurally constrained, the consequences ripple far beyond IT departments, affecting economic stability and innovation.
Market Concentration and Financial Implications
The CMA's final report revealed that the UK cloud market is dominated by AWS and Microsoft, which jointly control approximately 70-90% of the market share. It highlighted structural barriers to switching, including interoperability constraints and, in Microsoft's case, enterprise software licensing practices that can make running its ubiquitous software on rival cloud platforms significantly more expensive.
The regulator, typically cautious about publicizing contestable figures, estimated that if cloud prices were just five per cent above competitive levels, UK customers could be overpaying by around £500 million annually. This staggering figure alone should prompt urgent policy reconsideration.
Industry Polling Reinforces Urgency for Intervention
Recent polling conducted by Censuswide on behalf of the Open Cloud Coalition underscores these concerns. Among 250 cloud providers surveyed, 82% reported encountering competitive barriers, including restrictive licensing and contractual practices. Additionally, 71% believe regulatory intervention is now urgent. On the customer side, 64% described swift regulatory action as "very important," and 66% warned that further delays would likely result in higher costs and reduced flexibility for their organisations.
These are not abstract worries; they reflect the day-to-day operational realities in a market where transitioning between providers is complex, expensive, and risky. Even the government faces similar constraints. Andrew Forzani, the government’s chief commercial officer, recently acknowledged to the Public Accounts Committee that in parts of the hosting market, "there are a small number of very dominant suppliers, so for everybody there is limited choice." This limited choice weakens procurement leverage and complicates coordinated purchasing efforts.
Resilience Risks and AI Dependencies
Market concentration also raises significant resilience concerns. While outages can occur in any technological environment, when a vast portion of the economy depends on a small number of platforms, the impact is magnified. Businesses can stall, public services may be disrupted, and the wider economic costs can be substantial.
As artificial intelligence adoption accelerates, the stakes escalate further. AI systems are built and deployed within cloud environments. If the underlying infrastructure market is structurally constrained, the AI layer above it will inevitably mirror these same dynamics. Innovation thrives in open, contestable markets but stagnates where ecosystems become entrenched.
Frustration Over Regulatory Delays
Frustration with the pace of progress is not confined to industry alone. Kip Meek, who chaired the independent cloud inquiry that recommended action last summer, resigned earlier this year, nearly a year before his term was due to end. Speaking publicly about his departure, he cited concerns over the speed with which the inquiry’s recommendations were being implemented. "I shared concerns at the time that the CMA was taking a long time to pick up the recommendations of our report," he stated. "I'm still concerned that the pace is going slowly."
The CMA's leadership has emphasized its commitment to supporting growth and investment, an ambition widely shared. However, growth does not flourish in markets perceived as closed or structurally tilted. Challenger cloud providers need confidence that the market will remain open to meaningful competition, and investors require clarity that the UK's digital infrastructure is not locked into a permanent duopoly.
Call for Decisive Action
The CMA has already completed the diagnostic work, gathering evidence, assessing market dynamics, and concluding that adverse effects on competition exist. The critical question now is whether it will follow through using the powers parliament has granted. The forthcoming decision will send a clear signal about how seriously the UK intends to uphold competition in its digital foundations.
Moving forward with formal investigations and, where appropriate, implementing proportionate remedies would demonstrate that the regulator is prepared to act at a pace consistent with the markets it oversees. Britain's ambitions to lead in AI and digital innovation depend fundamentally on the strength and openness of its cloud infrastructure. The CMA has identified the problem; it now needs to act decisively.
