We report the results of two Earth System Model (ESM) configurations which differ in their ocean physics around New Zealand. The first is a global low-resolution configuration of UKESM1.0 while the second model, NZESM has an eddy-permitting ocean embedded around New Zealand. The nominal ocean resolution of the UKESM is 1 degree and that of the NZESM is 0.2 degrees. Near New Zealand, total cloud amount is negatively correlated with temperature. This relationship is reversed near the seasonal sea ice edge where increased evaporation results from open ocean which was previously covered in sea ice. In the simulations, the change to the cloud amount is dominated by changes to stratocumulus cloud and the resulting improvement to shortwave cloud radiative effect - with respect to CERES-EBAF observations - is statistically significant at the 95% level across the Southern Ocean, assuming a normally distributed control ensemble. The near-surface air temperature in the vicinity of the nested ocean model is also improved, when compared to ERA5 reanalysis data. In general, clouds and their radiative effects over the Southern Ocean are not well simulated by Earth System Models and the changes made here improve both near-surface temperature near New Zealand and zonal mean shortwave cloud radiative effect across the Southern Ocean. Noting that the development of climate models always involves an element of ‘tuning’, changing the regional ocean physics without doing any further tuning (as is the case here), will tend to remove some compensating bias and therefore make the model-observation agreement in some regions less good.