Competition regulator to investigate £7.5bn cloud services market

It said it was “particularly concerned” about the position of the market leaders Amazon and Microsoft, which together held a market share of around 70 per cent to 80 per cent. Google is their closest competitor, with a share of between 5 per cent and 10 per cent. Ofcom said that “if left unchecked, competition could deteriorate in a critical digital market for the UK economy”.

Fergal Farragher, Ofcom’s director responsible for the market study, said: “Some UK businesses have told us they’re concerned about it being too difficult to switch or mix and match cloud provider, and it’s not clear that competition is working well. So, we’re referring the market to the CMA for further scrutiny, to make sure business customers continue to benefit from cloud services.”

The CMA said it would look at whether there were competition concerns in the market and what interventions might be needed to improve the supply of cloud services for UK customers.

Sarah Cardell, chief executive of the CMA, said: “This is a £7.5bn market that underpins a whole host of online services, from social media to AI (artificial intelligence) foundation models. Many businesses now completely rely on cloud services, making effective competition in this market essential.

“Strong competition ensures a level playing field so that market power doesn’t end up in the hands of a few players, unlocking the full potential of these rapidly evolving digital markets so that people, businesses and the UK economy can get the maximum benefits.”

Millions of people and businesses have come to rely on cloud computing in recent years.

The CMA aims to complete its investigation by April 2025.

An Amazon Web Services (AWS) spokesman said: “We disagree with Ofcom’s findings and believe they are based on a fundamental misconception of how the IT sector functions, and the services and discounts on offer.”

He added: “UK companies, and the overall economy, benefit from robust competition among IT providers, and the cloud has made switching between providers easier than ever.

“Any unwarranted intervention could lead to unintended harm to IT customers and competition. AWS will work constructively with the CMA.”

A Microsoft spokesman said: “We are committed to ensuring the UK cloud industry remains innovative, highly competitive and an accelerator for growth across the economy.

“We will engage constructively with the CMA as they conduct their cloud services market investigation.”