Andy Burnham plans to curb non-compete clauses to boost UK tech startups

The UK government is preparing to clamp down on the use of non-compete clauses in employment contracts, aiming to make it easier for workers to change jobs and launch their own startups.

Speaking at a business summit in Manchester, Prime Minister Andy Burnham announced that ministers will introduce new legislation to ensure these restrictive clauses "no longer be a barrier" to recruitment. Burnham argued that the current rules are stifling the UK's technology and artificial intelligence sectors, preventing talented workers from moving between firms or striking out on their own.

"I think that's a drag on innovation," Burnham said, comparing the potential impact of the changes to the landmark 1995 Bosman court ruling that revolutionised European football transfers.

What the changes mean for employers and staff

Non-compete clauses are designed to stop employees from leaving a company and immediately working for a competitor or setting up a rival business. While they are most common in high-tech industries and financial services, government-cited research estimates they cover around five million workers across the UK, typically sidelining them for six months.

Burnham said the practice has "gone too far," sometimes forcing people to go without income after they resign. It also starves scaling businesses of the experienced staff they need to grow.

The government has been studying how to reform these rules since late last year. Options under consideration include:

• A complete ban on non-compete clauses.
• Banning the clauses only for workers earning below a certain salary threshold.
• Placing a strict legal cap on how long the restrictions can last.

The exact details of the new rules are expected to be revealed alongside the Budget on 28 October.

Why the tech sector is pushing for reform

The decision to reform employment contracts follows a sustained push from tech and AI startups, which have long complained that non-compete clauses allow dominant market leaders to hoard talent.

However, the reforms face resistance from some business groups. The previous Conservative government ultimately decided against a total ban on the clauses, after employers warned that doing so could harm investor confidence and make companies highly secretive about how they share information internally.

A wider push to keep firms in the UK

The changes to employment law are part of a broader effort by the government to stop British companies from relocating abroad to find funding.

Burnham acknowledged that too many of the country's best ideas are currently scaled overseas, taking jobs and investment with them. To combat this, he hinted that the upcoming Budget would include tax measures designed to encourage high-growth firms to stay in the UK.

He also expressed a desire to see a dedicated investment fund established in every UK region, using public money to kickstart private investment. The proposal is modelled on the Good Growth Fund, which was set up in Greater Manchester last year while Burnham was the region's mayor.