The UK government is planning to ban non-compete clauses in employment contracts, either completely or partially. According to six sources familiar with the matter who wished to remain anonymous, this announcement will be made soon, possibly as early as Friday.
Details of the Draft Announcement
Three of these six sources have stated that the announcement will likely be made directly by Prime Minister Andy Burnham. Burnham's government, like the previous government of Keir Starmer, presented options in November 2025 to limit the use of non-compete clauses. These clauses are generally designed to restrict a person's ability to work in a competing business after leaving their job.
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Response to Economic Concerns
Last month, over 20 founders of technology startups in the UK sent a letter to the government stating that these restrictions, along with notice periods and mandatory leave, weaken innovation and economic growth. Options discussed over the past 11 months included a complete ban on non-compete clauses or limiting them for employees earning above a certain threshold.
However, two of the mentioned sources indicated that the government will refrain from endorsing a specific option at this stage. Departments are expected to generally emphasize that non-compete clauses should no longer be a hiring issue for startups and innovative companies.
This announcement comes after John Healey, the Chancellor, stated that he wants to reduce business costs in the budget on October 28. One of the sources mentioned: “They want to present this policy as a supportive measure for growth and labor market liberalization.” The Minister of Artificial Intelligence, Kaniska Narian, also announced last week that the government is working on potential changes to this system.
Non-compete clauses are common in the financial services industry. The lobbying group TheCityUK opposed the ban on these clauses earlier this year, believing that they “promote competition and innovation in high-value industries” and are often “the only way to prevent the disclosure of confidential information and intellectual property.”
The government announced last year that despite non-compete clauses being considered “unenforceable” under current laws, ministers are concerned about the behavioral impact of these clauses in employment contracts. Even if these clauses are generally written and likely unenforceable, employees may perceive them as binding and comply out of fear of legal consequences.
