Prime minister Andy Burnham has promised to limit companies’ ability to restrict what employees can do after leaving their jobs, arguing that non-compete clauses in employment contracts have “gone too far” and are holding innovative UK businesses back.
Speaking at a business summit in Manchester, Burnham said the clauses had forced workers to go without pay after leaving a role and made it harder for growing firms to recruit new staff.
He confirmed the government would press ahead with new legislation to ensure the clauses can “no longer be a barrier” to hiring, adding that their use had stopped workers joining other companies or founding their own firms.
“I think that’s a drag on innovation,” he said.
Referencing a landmark 1995 court ruling credited with revolutionising the European football transfer market, he said he hoped reining in non-compete clauses could prove the “Bosman ruling for the innovation sector”.
The prime minister did not specify the scope of the planned restrictions, but suggested they would apply to the “everyday economy” as well as helping “promising start-ups and scaling firms”.
Sir Keir Starmer’s government had been exploring possible restrictions on the clauses since late last year, including a total ban, banning them above a certain salary threshold, or limiting how long they can last.
Although the clauses are commonly associated with the financial services and technology sectors, research cited by the government has estimated around 5 million jobs in Britain are covered by them, typically lasting around six months.
It is understood that the government plans to unveil details of the proposed restrictions, first reported by Politico and The Financial Times, alongside the Budget on 28 October.
Responding to the prime minister’s comments, the Recruitment and Employment Confederation warned against “sweeping” changes to non-compete rules, saying they played a “vital role” in protecting commercially sensitive information and client relationships.
The previous Conservative government had ruled out a total ban on the clauses after hearing from employers that it could reduce investor confidence in the UK or prompt companies to tighten how they share information internally.
Burnham sought to frame the announcement as part of a wider government pitch to boost innovative sectors of the economy. He told the summit that although the UK was home to outstanding research and start-ups, too many companies had gone abroad in search of investment.
He also signalled that the government would “say more” at the Budget about plans to use public investment to encourage private funding in the economy, and said he wanted all UK regions to have a dedicated fund to do this, modelled on the Good Growth Fund launched in Greater Manchester last year during his tenure as mayor of the city-region.
He also hinted that the government was looking at the tax system to ensure the UK can retain high-growth companies.
“One of our biggest challenges is breaking through our own ceiling,” he said. “Too often, our best ideas are developed and scaled overseas, and with it the jobs, technology and investment that go with them.”
“So I know there is more to do to fix that, specifically on tax, to encourage people to stay and scale.”
Ahead of the Budget later this month, he also said there was “more to do” on tax to encourage promising firms to stay in the UK.
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