Big Tech market dominance hinders 79% of UK digital firms

The concentration of cloud and software infrastructure creates a high-friction environment for UK streaming and digital media firms attempting to scale domestic AI capabilities. When a handful of providers like Microsoft and Amazon Web Services control the underlying compute and distribution layers, smaller innovators face prohibitive switching costs and limited leverage. This dependency risks turning the UK into a secondary market that merely consumes overseas technology rather than producing competitive alternatives. As the Competition and Markets Authority gains new enforcement tools, the industry should watch for specific interventions regarding business software interoperability and cloud egress fees to see if the regulatory environment actually shifts toward a more open ecosystem.

The Competition and Markets Authority has been building a regulatory framework specifically designed to address the concentration of power among hyperscalers. In January 2025, the CMA designated Amazon, Microsoft, and Google as having Strategic Market Status under the Digital Markets, Competition and Consumers Act, giving the regulator authority to impose conduct requirements on firms with substantial and entrenched market power in digital activities. This designation followed a multi-year market study into cloud services that found switching costs and ecosystem lock-in were suppressing competition. The CMA's cloud market study, published in April 2023, had already concluded that Amazon Web Services and Microsoft Azure held a combined 60-70% share of the UK cloud infrastructure market, with egress fees and integrated software ecosystems creating significant barriers for businesses attempting to migrate workloads between providers.

The IPPR report lands amid a broader push by UK policymakers to reduce dependency on a small number of foreign technology providers for critical digital infrastructure. In March 2025, the UK government published its AI Opportunities Action Plan, which identified sovereign compute capacity and reduced reliance on a narrow set of cloud providers as strategic priorities. The plan recommended establishing publicly accessible compute resources and incentivizing multi-cloud architectures to lower switching costs. Separately, Rocio Concha, the CMA's chief executive, stated in a June 2025 speech that the new digital markets regime would prioritize interoperability requirements and data portability obligations as the primary tools for reducing lock-in effects that the IPPR survey identified as barriers to innovation.

Technical and economic analyses reinforce the structural concerns raised by UK businesses. A 2024 report from the UK's National Audit Office found that government departments faced cloud egress fees averaging 8-10% of total annual cloud spend when migrating between providers, a cost structure that effectively penalizes multi-cloud strategies. The IPPR survey's finding that switching costs outweigh talent shortages as a barrier aligns with a 2025 study by the Alan Turing Institute showing that UK AI startups spent an average of 34% of their compute budgets on a single cloud provider, limiting their ability to benchmark performance across platforms or negotiate volume discounts. For streaming and digital media firms specifically, the concentration of GPU compute among three providers means that training and inference workloads for content recommendation, ad targeting, and video processing remain subject to the pricing and availability decisions of a small number of vendors.