CMA must act now to fix Britain’s broken cloud market
The CMA correctly diagnosed the UK cloud market as broken and dysfunctional, so why isn’t it changing anything, writes Lord Clement-Jones
Last summer, after the most detailed investigation of its kind, the Competition and Markets Authority (CMA) finally diagnosed the UK’s cloud market as broken and dysfunctional.
It identified high levels of market concentration, barriers to switching and restrictive software licensing practices that limit effective competition.
Seven months later, action has yet to follow.
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. That 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 almost every part of the modern economy, that is a long time.
AI relies on a good cloud system
Cloud computing is not just another technology. It is the foundation on which AI systems run, public services operate and critical infrastructure depends. Finance, healthcare, defence, retail and transport all rely on cloud platforms. When cloud markets are highly concentrated and structurally constrained, the consequences extend far beyond IT departments.
The CMA’s final report found that the UK cloud market is highly concentrated, with AWS and Microsoft together jointly enjoying around 70-90 per cent market share. It identified structural barriers to switching, including interoperability constraints and, in Microsoft’s case, enterprise software licensing practices that can make it significantly more expensive to run its ubiquitous software on rival cloud platforms.
The regulator, not noted for putting contestable numbers into the public domain, estimated that if cloud prices were on average just five per cent above competitive levels, UK customers could be paying around £500m more each year than they would in a well-functioning market. That figure alone should give policymakers pause.
Regulatory action now ‘urgent’
Recent polling conducted by Censuswide on behalf of the Open Cloud Coalition reinforces those concerns. Among 250 cloud providers surveyed, 82 per cent reported encountering competitive barriers, including restrictive licensing and contractual practices. 71 per cent believe regulatory intervention is now urgent. On the customer side, 64 per cent described swift regulatory action as “very important”, and 66 per cent said further delays would likely result in higher costs and reduced flexibility for their organisations.
These are not abstract worries. They reflect day-to-day operational realities in a market where moving between providers can be complex, expensive and risky.
Government itself faces similar constraints. Appearing before the Public Accounts Committee recently, Andrew Forzani, the government’s chief commercial officer, acknowledged that in parts of the hosting market “there are a small number of very dominant suppliers, so for everybody there is limited choice”. Limited choice weakens procurement leverage and makes coordinated purchasing more difficult.
Concentration also raises resilience concerns. Outages happen in any technology environment. But when so much of the economy depends on a small number of platforms, the impact is magnified. Businesses stall, public services are disrupted and the wider economic costs can be significant.
As artificial intelligence (AI) adoption accelerates, the stakes grow higher still. AI systems are built and deployed within cloud environments. If the underlying infrastructure market is structurally constrained, the AI layer above it will inevitably reflect those same dynamics. Innovation thrives in open, contestable markets; it slows where ecosystems become entrenched.
Why is the CMA dragging its heels?
Frustration with the pace of progress is not confined to industry. Kip Meek, who chaired the independent cloud inquiry that recommended action last summer, resigned earlier this year, almost a year before his term was due to end. Speaking publicly about his departure, he cited concern at the speed with which the inquiry’s recommendations were being taken forward. “I shared concerns at the time that the CMA was taking a long time to pick up the recommendations of our report,” he said. “I’m still concerned that the pace is going slowly.”
The CMA’s leadership has emphasised that it wants to support growth and investment. That ambition is widely shared. But 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. Investors need clarity that the UK’s digital infrastructure is not effectively locked into a permanent duopoly.
The CMA has already done the diagnostic work. It has gathered evidence, assessed market dynamics and concluded that adverse effects on competition exist. The question now is whether it will follow through using the powers parliament has given it.
The forthcoming decision will send a clear signal about how seriously the UK intends to take competition in its digital foundations. Moving forward with formal investigations and, where appropriate, 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 on the strength and openness of its cloud infrastructure. The CMA has identified the problem. It now needs to act.
Lord Timothy Clement-Jones is a Liberal Democrat Lords DSIT spokesperson