The UK's Competition and Markets Authority faces a critical test of institutional will. After nearly two years investigating the cloud services market, the regulator found clear evidence that Microsoft and AWS are harming competition. Yet nine months after publishing those findings, it has taken no action. Meanwhile, taxpayers continue writing cheques for cloud services at rates that grow harder to reverse with each passing month.
The CMA board expects to make a decision on which option to prioritise in the first quarter of 2026, but that moment now appears distant. The delay costs real money. The UK government signed SPA24, a five-year Strategic Partnership Agreement that effectively commits public sector organisations to spend about £1.9 billion per year on Microsoft products and services, adding up to nearly £9 billion over five years. Without competition reform, that spending will only grow.
The core problem is structural lock-in. The UK government has admitted its negotiating power over billions of pounds of cloud infrastructure spending has been inhibited by vendor lock-in. Government departments, NHS trusts, and local councils running on Microsoft's stack face genuine switching costs. Moving workloads between cloud providers requires time, technical expertise, and operational disruption. The longer organisations remain locked in, the more entrenched the current arrangement becomes.
The CMA concluded that market concentration exists, with Amazon Web Services and Microsoft each taking between 30 and 40 percent of the market. The regulator also identified Microsoft's software licensing practices as a competitive barrier; the firm charges different rates or restricts access for customers running Windows Server or SQL Server on rival clouds, making Azure artificially more attractive.
Now consider the AI dimension. The CMA warns that as AI becomes a more critical differentiator, the competitive imbalance may worsen unless action is taken now. Microsoft's recent integration of Copilot and AI tools into its 365 and Azure offerings means public sector organisations already locked into Microsoft contracts face little incentive to explore alternatives. The path of least resistance is to buy deeper into the same ecosystem. Every AI procurement reinforces the dependency.
The regulator's proposed remedy is to designate Microsoft and AWS with "strategic market status" under new digital markets powers, enabling targeted interventions. But that designation remains theoretical. More than 70 per cent of UK cloud providers support urgent regulatory intervention, with 71.2 per cent of participating cloud providers considering regulatory action to be urgent or extremely urgent. Yet the CMA's timeline suggests no real action before mid-2026 at the earliest.
The regulator itself faces credibility questions. The CMA named Doug Gurr, a former Amazon executive whose tenure at the corporation lasted 16 years, as permanent Chairman. Kip Meeks, who worked as Inquiry Chair at the CMA since 2018, left in late January, reportedly citing frustration at the slow pace of reform. The perception of a conflict of interest matters; the watchdog itself signed a contract with AWS for the provision of cloud services, doubling its spend with the American giant in 2024.
The fiscal argument is straightforward. Every month of delay allows Microsoft to extract value from a captive customer base. Negotiations weaken, contracts renew under existing terms, and public sector organisations lose flexibility precisely when digital transformation demands the opposite. The government cannot drive innovation or efficiency when competition is distorted and switching costs are prohibitively high.
The CMA's investigation work was thorough. Its findings are clear. The question now is whether the institution will act on its own conclusions, or whether institutional inertia will continue to defer a decision that taxpayers have already waited two years to see enforced.