The Government has announced that it will legislate to restrict the use of non-compete clauses, as part of its plans to encourage innovation and make it easier for growing businesses to recruit experienced staff.
Speaking at the Innovation Nation Summit on 9 October 2026, Prime Minister Andy Burnham said that some employers had gone “too far” in using restrictions that prevent former employees from joining competitors or establishing businesses of their own. He described non-competes as a “drag on innovation” and promised legislation ensuring that they no longer create a barrier to hiring for promising start-ups and scaling firms. He also indicated that workers in the wider “everyday economy” should not be prevented from changing jobs.
The Budget on 28 October 2026 confirmed this commitment and stated that the reforms to non-compete clauses will apply “across the whole of the economy”. The Budget document notes that the Government will be consulting “shortly” to understand the wider use of restrictive practices, with a view to publishing a detailed Government position in early 2027 in advance of legislating.
Background
Non-compete clauses are often used by employers to protect their business interests when employees depart and typically prevent employees from competing with their former employer for a defined period of time. The law already places some restrictions on the use of non-competes, which are void for being in restraint of trade unless the employer can show they have a legitimate business interest to protect and the restriction goes no further than reasonably necessary.
Burnham’s speech in Manchester isn’t the first time the Government has announced plans to reform the use of non-competes, which have been on the political agenda for some time. In 2023, the previous Conservative Government conducted research and consulted on options for reform, resulting in an announcement that it would introduce a statutory limit on the length of non-compete clauses of three months, although this never came to fruition. Then, in November 2025, Kier Starmer’s Labour Government published a working paper seeking views on different policy options for reform, including introducing limits on the length of non-competes, imposing a salary threshold, a combination of the two or banning them altogether (see our previous article).
The latest statement from the Prime Minister is therefore a clear indication that reform of non-competes remains firmly in the Government’s sights.
Impacts for Employers
The announcement is significant, but important details remain unknown. The Government has not said whether this proposal is tied to last year’s working paper, nor have they confirmed how broad its proposals for reform will go. However, Burnham’s speech did make reference to addressing wider use of “restrictive practices”, which could encompass wider contractual mechanics frequently used to protect confidential information and competitive activity, for example use of notice periods, garden leave and other restrictions on soliciting key personnel and/or clients.
For now, the law has not changed, but this is a useful opportunity for employers to review their contracts and use of post-termination restrictions ahead of any new measures.
We will be continuing to monitor updates on our Reform Hub.
