The government has announced plans to limit non-compete clauses in employment contracts. We look at what may be changing and what's still unclear.
In a speech on 9 October 2026, the Prime Minister, Andy Burnham, confirmed that the government intends to clamp down on non-compete clauses in employment contracts.
He didn’t provide details of the potential changes but observed that “some businesses have gone too far in their use of restrictive practices such as non-compete clauses”. The government is to propose legislation to address the concern that non-compete clauses (and related obligations) are a barrier to hiring for start-ups.
The announcement follows a recent letter sent to the government by founders of several tech start-ups in which it was argued that non-competes, along with long notice periods and enforced garden leave, were "undermin[ing] the innovation that drives economic growth".
In November 2025, former Prime Minister, Kier Starmer’s Labour government published a working paper alongside the Budget inviting views on options for reform of non-compete clauses.
What is the current law on non-competes?
Non-compete clauses are one type of “post-termination restraint” that an employer may agree with an employee and have the potential to prevent a departing employee from engaging in competitive activities for a defined period.
There is currently no statutory limit on the duration of a non-compete clause. Unlike some other jurisdictions, there is no salary threshold for their use, and nor is there any requirement to pay employees mandatory compensation for the duration of a post-termination non-compete period.
Hasn't this been proposed before?
Yes, potential reform has been on the table for many years, but changes have not been introduced. Prior to the November 2025 working paper:
- In December 2020, the then Conservative government launched a consultation on reforming non-compete clauses in employment contracts.
- In May 2023, the government confirmed its intention to introduce a statutory cap of three months on non-competes in employment and worker contracts, rejecting both mandatory compensation and a full ban. Those changes were not implemented before the July 2024 general election.
What changes might we expect?
We cannot yet be certain, but the following are possibilities previously considered:
- Outright ban: The government could introduce legislation rendering non-compete clauses for employees unenforceable.
- Salary threshold: Non-competes could be banned for workers earning below a certain level.
- Statutory cap on duration: Non-competes could be capped to a maximum duration.
- Mandatory compensation: Many countries require employers to pay a mandatory percentage of a departing employee’s compensation during their non-compete period.
- Restrictions based on employer size: The November 2025 working paper sought views on varying a statutory cap on duration based on employer size. Given the emphasis in the Prime Minister’s announcement on the impact of non-compete clauses on start-up and scaling firms, it’s possible that proposed changes could be varied on the basis of employer size, and could also potentially be sector specific.
Long notice periods and enforced garden leave have also been criticised as barriers to innovation, and the Prime Minister’s announcement indicates the government’s intention to tackle the wider use of restrictive practices beyond non-compete clauses.
Our view
Research conducted by Lewis Silkin has indicated that employers are broadly opposed to an outright ban on non-compete clauses. We have previously expressed concern that reform may be pursued based on misconceptions about the value and importance of non-competes to businesses, and a ‘one-size-fits-all’ approach risks doing serious harm.
What can you do now?
Until the scope of any changes becomes clear and any legislation comes into force, employers should continue to include non-compete clauses in contracts where appropriate. However, it is worth starting to evaluate alternative ways of protecting your business in anticipation of future changes. In the meantime, we recommend that businesses:
- review garden leave provisions and notice periods;
- maximise the protection afforded by other covenants, including non-solicitation, non-dealing and team-move restrictions;
- consider incentive arrangements, including repayment provisions; and
- review confidentiality and IP strategies alongside existing restraints.
What’s next?
Any changes will require primary legislation. The announcement comes ahead of the Chancellor's Budget on 28 October, which may provide further detail on the scope of potential changes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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