Two thirds of UK enterprises want to ditch US cloud providers – but they're stuck paying a hefty 'sovereignty tax' that keeps them locked in

Two-thirds (66%) of UK businesses could ditch US cloud providers due to rising concerns about digital sovereignty, according to a new study.

Research conducted by Civo found digital sovereignty is now viewed as a “strategic priority” by 73% of firms, marking a 12-point increase compared to last year and shaping decisions on what cloud services to use.

Reliance on a limited pool of foreign cloud providers is also an area of concern, according to Civo, with 64% highlighting this as a recurring talking point.

Notably, with businesses ramping up AI adoption, this adds another layer of complexity to sovereignty-related discussions.

Latest Videos From

Watch full video here:

More than half (58%) of respondents told the firm they’re concerned about their AI providers’ legal jurisdiction, while 43% said AI workloads must be hosted within the UK.

“AI has raised the stakes for digital sovereignty,” said Civo chief executive Mark Boost. “The issue is no longer just where data is stored, but also where systems are built, who controls the infrastructure and which legal jurisdiction it falls under.”

“The UK must control the infrastructure on which AI is built to ensure long-term competitiveness in the field. Sovereign cloud is about resilience, choice and control, not digital isolationism,” he added.

UK firms paying the ‘sovereignty tax’

While British companies are keen to reduce their reliance on US-based tech providers, the Civo study noted that many are unable to “break free” and are locked in a cycle of dependency.

Civo refers to this as a “sovereignty tax”, which creates “significant financial, operational, and strategic risks”.

“UK leaders clearly want to break free from Big Tech dependency, but find themselves trapped by an ever-tightening web,” Boost commented.

“This is not a proactive investment or deliberate strategy. It is a symptom of organizations becoming increasingly ensnared in the same hyperscaler ecosystems they acknowledge to be a significant long-term risk.”

Key hurdles to reducing dependence include technical lock-in, complexity of migration, contractual barriers, and various other financial implications of switching providers.

Civo noted that the number of companies that have successfully migrated to a domestic alternative has “stalled” at just 15% while only one-in-four UK companies believe they could ditch a US provider entirely.

Looking ahead, the company predicts that UK firms could end up becoming “more deeply entrenched” in US hyperscaler systems, with 28% having already found themselves in this predicament.

A ‘dangerous loss of autonomy’

Civo warned that remaining locked into foreign-owned infrastructure could result in a “dangerous loss of autonomy” for UK firms, and this isn’t just in terms of data privacy or security.

Other factors also play a role in the aforementioned sovereignty tax, such as unpredictable costs and events such as outages. The firm specifically highlighted the latter of these as a potential danger for UK businesses, with 39% of firms having experienced outages originating from US hyperscalers over the last year.

Enterprises across the country were impacted by a series of major cloud outages last year, most notably with Amazon Web Services (AWS) and Microsoft Azure. Similar outages at Cloudflare, meanwhile, also had a huge impact on operations for firms operating across a range of sectors.

These outages have a huge financial impact on UK enterprises, Civo noted. That tracks with research from Relic last year that warned many UK and Irish firms are “severely underestimating” the costs associated with outages.

Analysis from the firm revealed that “high-impact” outages carry a median cost of around $2 million per hour, with UK and Ireland-based organisations reporting losses of between $1 million and $3 million per hour.

FOLLOW US ON SOCIAL MEDIA

Follow ITPro on Google News and add us as a preferred source to keep tabs on all our latest news, analysis, views, and reviews.

You can also follow ITPro on LinkedIn, X, Facebook, and BlueSky.