The Competition and Markets Authority (CMA) has published provisional findings from its investigation into the UK cloud services market, revealing that competition is not functioning optimally. This situation is likely resulting in increased costs, limited choices, diminished innovation, and lower service quality for businesses across the UK.

Cloud services are essential for many sectors, including financial services, retail, and public services, with UK businesses spending £9 billion on these services in 2023, a figure that is growing by over 30% annually. The inquiry group found that customers face a restricted selection of providers, primarily dominated by Amazon Web Services (AWS) and Microsoft, each holding up to 40% of the market share, while Google holds a significantly smaller share.

Technical and commercial barriers hinder customers from switching between providers, effectively locking them into their initial choices, which may not align with their evolving needs. Additionally, substantial capital investments create significant barriers for new entrants, making it challenging for alternative cloud suppliers to compete.

The inquiry group also noted that Microsoft leverages its strong software position to impede competition from AWS and Google, further reducing competitive pressure in the cloud services market. This situation complicates customers' ability to switch providers or utilize multiple cloud services, ultimately affecting pricing and service quality.

The CMA is considering using its powers under the Digital Markets, Competition and Consumers Act 2024 to designate AWS and Microsoft as having strategic market status (SMS) in cloud services. This designation could lead to measures that enhance competition, improve service quality, and drive down prices, benefiting UK businesses and the economy as a whole.

The inquiry group will consult on these provisional findings and recommendations before making a final decision by August 4, 2025. The CMA's investigation was initiated following a reference from Ofcom, which had previously identified features harming competition in the cloud services market.