The UK's competition watchdog has raised significant concerns about the state of the country's £9 billion cloud computing market, warning that limited competition between providers is potentially driving up costs and stifling innovation across the British economy.

In provisional findings, the Competition and Markets Authority (CMA) revealed that Amazon Web Services (AWS) and Microsoft each control up to 40% of UK cloud service spending, with Google trailing as a distant third. The regulator suggested this dominance may be hampering competition and leading to higher prices, reduced innovation, and lower service quality for British businesses.

The investigation highlighted several key issues in the market, including significant barriers preventing customers from switching between providers and obstacles facing new competitors trying to enter the market. The CMA specifically called out Microsoft for leveraging its strong position in software to make it harder for AWS and Google to compete effectively for customers that wish to use Microsoft software on the cloud. This reduces the competitive challenge that AWS and Google can provide in cloud services and to Microsoft’s position.

"Cloud services underpin most business operations, providing vital infrastructure to businesses and organisations across the UK economy," said Kip Meek, chair of the CMA's independent inquiry group. "Our provisional view is that competition in this market is not working as well as it could be."

Rima Alaily, Corporate Vice President and Deputy General Counsel Competition Law Group at Microsoft, responded, “The draft report should be focused on paving the way for the UK's AI-powered future, not fixating on legacy products launched in the last century. The cloud computing market has never been so dynamic and competitive, attracting billions in investments, new entrants, and rapid innovation. What could be better for UK businesses and government? 

The regulator is now recommending that AWS and Microsoft be investigated under new digital markets powers granted by the UK Digital Markets, Competition and Consumers Act 2024. This could lead to both companies being designated with "strategic market status," subjecting them to additional oversight and potential restrictions.

Interventions the CMA could consider may include measures to encourage appropriate technical standardisation, reduce data transfer charges incurred in switching and multi cloud and/or ensure fair licensing of software.

Craig Stockdale, ANZ Country Manager at cloud vendor Wasabi Technologies, said, “The CMA’s investigation into the UK cloud market exposes the harmful practices of dominant players. They have suggested the high fees for transferring data out (egress fees), committed spend discounts (commercial models) and technical restrictions are making it difficult for business to switch cloud provider or use multiple providers (hybrid cloud).

“We conducted our own global survey of the market and found 47% of cloud storage billing is swallowed by fees like egress charges, API calls, and retrieval costs – charges that are often hidden and make it difficult for businesses to understand or predict their cloud spending. This lack of transparency when it comes to cloud storage costs creates an uneven playing field, favouring hyperscalers and actively stifles innovation by discouraging businesses from fully leveraging and accessing their own data.

“Similar constraints apply to the Australian market. While exact data is not yet available, the dominance of hyperscalers reveals that the same challenges in pricing clarity and competition exist.”

 The UK cloud services market, which includes infrastructure and platform services essential for business operations, continues to grow rapidly, with spending increasing by over 30% annually. The CMA's investigation found that customers, ranging from financial services firms to digital startups and public services, face limited choices when selecting providers capable of meeting their full range of needs.

The CMA surveyed a number of customers of cloud providers, including a large UK government department which submitted that ‘switching between cloud suppliers brings significant egress charges.’

A logistics company said that it was incentivised to remain with its existing cloud provider due to egress fees (amongst other factors). It added that ‘if Egress costs were removed… it would make moving works loads easier between clouds’

The inquiry group is now seeking responses to its provisional findings before making its final decision by August 4, 2025. Potential interventions could include measures to encourage technical standardization, reduce data transfer charges, and ensure fair software licensing practices.

The investigation stems from a referral by Ofcom and represents one of the first major tests of the UK's new digital markets regime, which came into force on January 1, 2025. The CMA's findings could have significant implications for how cloud services are delivered to British businesses in the future.

The full findings are at the cloud services market investigation case page.