Ofcom had said in April it was worried a lack of competition made it difficult for businesses to switch providers.

It has referred the sector to the UK's Competition and Markets Authority (CMA) to look into the issue.

Amazon and Microsoft both told the BBC they would work with the CMA as it conducts its investigation. However, Amazon said it felt Ofcom's concernswere "based on a fundamental misconception" of the sector.

Cloud computing broadly refers to the storage of data online that can be accessed anywhere at any time.

It has become an essential bit of infrastructure for both businesses and individuals and is how millions of people store large amounts of data, use software remotely, stream music and videos, and play games.

It is sometimes described as using "other people's computers", vast networks of powerful machines stored in massive data centers around the world, and many of those belong to either Amazon or Microsoft.

The services are used by businesses across the UK, and Ofcom estimated that in 2022 the cloud services market in the UK was worth up to £7.5bn.

"Many businesses now completely rely on cloud services, making effective competition in this market essential," said CMA chief executive Sarah Cardell.

"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.

"The CMA's independent inquiry group will now carry out an investigation to determine whether competition in this market is working well and if not, what action should be taken to address any issues it finds."

The CMA said it would conclude its investigation by April 2025. The body has the power to force companies to change practices, block purchases, or even sell off parts of their businesses if it feels there is a legitimate threat to the market.

"All credit to Ofcom for addressing the anti-competitive issues such as data egress fees, technical and commercial lock-ins that have damaged and distorted the UK's growing cloud infrastructure market for too long," said Nicky Stewart, former head of ICT at the Cabinet Office.

"It's imperative that the CMA thoroughly investigates all the deep-seated issues in this critical market which underpins so much of our nation's digital infrastructure - and that includes anti-competitive licensing."