The Competition and Markets Authority has opened a formal investigation into the cloud computing market, examining whether a small number of dominant providers are restricting competition in a sector now worth more than £15 billion annually to the UK economy.
The probe, announced on Tuesday, will scrutinise the practices of the three largest cloud infrastructure providers, which collectively control more than 80 per cent of the British market. The regulator said it had received complaints from smaller competitors and business customers about anti-competitive behaviour including high data egress fees and contractual barriers that make it difficult to switch providers.
Cloud computing has become a critical component of the UK’s digital infrastructure. Government estimates suggest that more than 60 per cent of British businesses now rely on public cloud services for core operations, up from 45 per cent in 2022. The CMA said the investigation was prompted by concerns that market concentration could stifle innovation and raise costs for businesses and consumers.
Michael Trent, a technology policy analyst at the Centre for Digital Innovation, said the investigation was long overdue. ‘The cloud market has consolidated rapidly over the past five years. When a handful of providers can effectively set prices and terms for the entire economy, that is a competition problem, not just a tech sector issue,’ he said.
Smaller cloud providers have welcomed the inquiry. James Holloway, chief executive of Manchester-based cloud firm NovaStack, said the current market dynamics made it nearly impossible for independent providers to compete. ‘We spend more time helping clients navigate exit fees and data migration costs than we do building better products. That is not how a healthy market should work,’ he said.
The CMA has set a six-month timeline for the initial phase of the investigation, with a final report expected by early 2027. The regulator has the power to impose legally binding remedies if it finds evidence of anti-competitive behaviour, including forcing providers to change pricing structures and contractual terms.
The investigation follows similar actions by regulators in the European Union and Australia, both of which have introduced measures to improve cloud market competition. Industry observers expect the CMA to consider comparable remedies tailored to the UK market.
The three largest cloud providers have stated they will cooperate fully with the investigation. In a joint statement, they argued that the UK cloud market remains highly competitive and that prices have fallen significantly over the past decade. The CMA said it would publish its preliminary findings for public consultation later this year.