The inquiry group's report provisionally recommends that the CMA board considers investigating AWS and Microsoft's cloud service activities using new digital markets powers.
- Provisional findings show competition in the £9 billion UK cloud services markets is not working as well as it could be.
The Competition and Markets Authority's (CMA) independent inquiry group has today published provisional findings following an in-depth assessment into cloud services. It has provisionally found that competition is not working as well as it could be, which is likely to be leading to higher costs, less choice, less innovation and lower quality of service for businesses and organisations across the UK economy.
Cloud services provide vital infrastructure which supports improved innovation, productivity and scaling for most businesses and organisations in the UK. Customers include financial services, retailers, digital start-ups and key public services who spent £9 billion on cloud services in 2023, a figure growing by over 30% each year.
In its report, the inquiry group provisionally found:
Cloud customers face a limited choice of providers and do not consider many providers are able to provide the range of services that they need. Amazon Web Services (AWS) and Microsoft are the two large providers of cloud services, each with a share of up to 40% of UK customer spend on cloud services. Google is the next largest provider with a much smaller share.
Technical and commercial barriers make it difficult for cloud customers to switch between and use different cloud providers, locking them into their initial choices which may not reflect their evolving business needs.
There are significant barriers to entry and expansion due to the very large capital investment needed to supply cloud services, making it harder for alternative cloud suppliers to enter and grow in these markets.
Microsoft is using its strong position in software to make it harder for AWS and Google to compete effectively for cloud 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.
The inquiry group provisionally believes these concerns make it harder for customers to switch cloud provider or use multiple clouds, which may ultimately impact the price and quality of cloud services. The ability of UK businesses to put healthy pressure on cloud providers to offer better deals is key to ensuring good outcomes and to unlocking the potential benefits of cloud services.
The inquiry group provisionally recommends that the CMA use its powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) to consider whether to designate the two largest providers, AWS and Microsoft, with strategic market status (SMS) in relation to their respective digital activities in cloud services.
Kip Meek, chair of the CMA's independent inquiry group, said:
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.
Effective competition in the delivery of these vital services could drive choice, quality and competitive prices - not only helping UK businesses but boosting innovation, productivity, growth and investment across the UK economy.
The inquiry group will consult on its provisional findings and recommendations before making a final decision by the statutory deadline of 4 August 2025.
