Well it depends on how Microsoft's accountants manage the maths:
Hypothetically, if MS + Activision - UK > MS + UK - Activision (assuming it's only blocked in UK), it's plausible that Microsoft withdraws from UK to pursue its business with the merger everywhere else. The UK is a decent sized market, but it's far from the biggest.
There is another possibility here, which is MS + Activision - Cloud Gaming > MS + Cloud Gaming.
I wonder if MSFT is considering that at all. They obviously have the numbers, but I wouldn't be surprised if cloud gaming hasn't seen the growth they expected and it makes sense to kill it entirely.
That was also the thought process of many smaller companies to implement EU data privacy rules. It was easier to stop serving the market instead of complying.
Hypothetically, if MS + Activision - UK > MS + UK - Activision (assuming it's only blocked in UK), it's plausible that Microsoft withdraws from UK to pursue its business with the merger everywhere else. The UK is a decent sized market, but it's far from the biggest.