Burnham pledges to restrict non-compete clauses in employment contracts

Prime Minister Andy Burnham has committed to introducing legislation that limits the use of non-compete clauses in employment contracts, arguing that such restrictions have “gone too far” and are stifling innovation within the UK.

Speaking at The Innovation Nation Summit in Manchester ahead of the October Budget, Burnham stated that the current rules prevent workers from leaving their roles to join other companies or launch their own ventures, often forcing them to go without pay during the restriction period. He also noted the clauses create hiring barriers for growing firms.

The move follows extensive consultations by Sir Keir Starmer’s government, which had considered options ranging from a total prohibition to capping the clauses based on salary thresholds or duration. Government research estimates that approximately five million British jobs are subject to these clauses, with a typical duration of six months, particularly within the financial services and technology sectors.

Burnham confirmed that new laws would ensure these clauses “can no longer be a barrier” to recruitment, describing the potential reform as a landmark shift akin to the “Bosman ruling” that transformed European football transfers. While he did not outline specific limits, sources indicate the proposals will be detailed alongside the Budget on 28 October.

The previous Conservative administration had rejected a complete ban, citing concerns that it could deter investor confidence and lead companies to tighten internal information sharing. In contrast, Burnham framed the changes as part of a broader strategy to keep high-growth companies in the UK, hinting at further tax reforms and regional investment funds modeled on Greater Manchester’s Good Growth Fund to support scaling businesses.