The CMA, which has been reviewing the deal since November, says the merger in its current form raises “competition concerns.”

It is concerned that the deal could harm competition in the sector.

The deal raises issues about the “provision of retail investment platform solutions in the UK,” said the CMA.

The CMA is primarily concerned about the loss of competition.

At the end of March the CMA gave FNZ five days to offer undertakings on how the merger would work. On 6 April FNZ informed the CMA it would not offer any requested undertakings.

The CMA says its concerns have not been addressed fully and a Phase 2 investigation will take place which will run until 22 September.

The CMA said earlier it believes there is a risk the merger could mean higher prices, fewer options and less innovation.

FNZ purchased GBST in November 2019 and both companies are major players in the UK platform sector. They provide the ‘engines’ behind most of the UK’s biggest retail investment platforms.

FNZ clients include Aviva, Barclays, HSBC, Lloyds Banking Group, National Australia Bank, Quilter, Santander, Standard Life Aberdeen, UBS, Vanguard and Zurich. GBST clients include AJ Bell, Raymond James and Vitality.

The CMA’s decision to refer is under section 22 of the Enterprise Act 2002.

The CMA said that after completing its initial Phase 1 investigation, it found that FNZ and GBST were “close competitors” in what is a concentrated market with “few other significant suppliers.”

Smaller or less well-established firms have found it difficult to enter or scale up because of the risks and reluctance of customers to change suppliers, said the CMA.