It would be pretty crazy, but it's not impossible. They aren't going to pull out of the USA though.
It’s also theoretically possible that the deal goes through despite the CMA not approving it. I’m not a lawyer and I don’t know if that looks like Microsoft no longer selling games and gaming in the UK (possible) or no longer doing business in the UK entirely (not likely).
Besides, the US filed suit back in 2022.
The argument given by the UK's bureaucrats had something to do with cloud gaming. I guess they could make Activision's tittles available on competing cloud gaming platforms in the UK.
https://www.nytimes.com/2023/06/12/technology/ftc-sue-micros...
There are loads of solutions to this problem, the most obvious one being pulling Activision titles out of the U.K. or spinning off independent distribution rights to that market.