Andy Burnham announces plans to ease non-compete clause rules

In a speech at Innovation Nation Summit in Manchester, the Prime Minister has confirmed that the Government will legislate to ease restrictive non-compete clauses, describing their use in employment contracts as “a drag on innovation.”

The intention being that non-competes will no longer be a barrier to hiring for "our most promising startups and scaling firms".

Non-competes are particularly common in the technology sector, and a collective of UK tech-start-ups wrote to the government last month, arguing that the restrictions were undermining innovation and economic growth. TheCityUK are amongst those who have lobbied against the proposed changes, highlighting the risk of damaging competition and investor confidence within the UK's high-value industries.

The Government estimates that around five million employees in Great Britain have a non-compete clause in their contract, typically lasting around six months.

Under current English law, a non-compete will generally be unenforceable unless the employer can demonstrate that it goes no further than is reasonably necessary to protect a legitimate business interest. Other countries have taken different approaches to balancing business protection and employee mobility. For example, in Germany employers are required to compensate employees during non-compete periods, which may last for up to two years. California, by contrast, generally prohibits clauses that prevent a person from engaging in a lawful trade - an approach often associated with its pro-innovation environment and emphasis on employee mobility.

Reform to non-competes is not a new proposal. In 2023, the Conservative Government announced plans for a three-month statutory cap on non-competes, although the legislation was never introduced. In November 2025, the Government published a working paper seeking views on options including an outright ban, a statutory limit on duration, a ban below a salary threshold, or a combination of a salary threshold and maximum duration.

The scope of the most recent proposal remains unclear, but it is thought that further details may be announced alongside the budget on 28 October 2026.

For employers in innovation-heavy sectors such as technology and life sciences, the debate around non-competes is more nuanced. Greater employee mobility may help start-ups and scale-ups access scarce specialist talent and encourage the spread of ideas and expertise. At the same time, businesses investing heavily in R&D may rely on carefully drafted restrictions to protect valuable confidential information, trade secrets and commercially sensitive know-how when key employees leave. The challenge for the Government will therefore be to increase mobility without undermining the protections which give businesses confidence to invest in people and innovation.

For now, employers do not need to tear up their contracts and re-write their restrictive covenants. However, businesses, particularly those in technology and life sciences, should keep developments under review and consider whether their existing protections are appropriately tailored. If the Government significantly curtails non-competes, greater emphasis may need to be placed on confidentiality and IP provisions, non-solicitation and non-dealing covenants, notice periods and garden leave.

If you have any questions about the Employment Rights Act 2025 and the steps your organisation should be taking in light of the upcoming changes, please contact the Employment Team.