The thing is, once data is in iCloud, there are other ways you can retrieve it and back it up yourself as long as you do have working authentication, and I can see no good argument for not offering E2E encryption across the board that is tied to such identification.
Worst case, you generate a suitably robust key that is used for authentication and encryption, and you provide a means to export it and back it up however you want without sending it to any third party. You can still use all the snazzy secure enclaves and facial recognition and so on to protect a copy of that key that is held on each of your personal devices to enable easy but reasonably secure access, but the underlying technology is tried and tested, it does not have the lock-in problem, and it does not require data in iCloud to be accessible to anyone but the keyholder.
Also note that this needn't necessarily be mandatory. If users are OK with trusting Apple, they could still use the current approach. But if you're going to claim to be a strong supporter of privacy and security, you should really have at least the option for proper encryption of everything for those people and businesses that want it.