Government announces plans to restrict non-compete clauses

Prime Minister Andy Burnham has announced plans to restrict the use of non-compete clauses in employment contracts, as part of the Government's drive to encourage innovation and economic growth.

Non-compete clauses are contractual restrictions which prevent an employee from competing with their former employer for a period after their employment ends. For example, they may prevent someone from joining a competitor or setting up a competing business.

There is currently no statutory limit on how long a non-compete clause can last. However, that does not mean that any restriction will be enforceable. Under the existing law on restraint of trade, a non-compete clause will generally only be enforceable where it goes no further than is reasonably necessary to protect an employer's legitimate business interests.  

There is also currently no salary threshold determining which employees may be subject to a non-compete clause, and employers are not generally required to compensate employees for the period during which a post-termination non-compete applies.

In his speech on 9 October 2026, the Prime Minister said that some businesses had "gone too far" in their use of restrictive practices such as non-compete clauses. He described the restrictions as a "drag on innovation" and confirmed that the Government would legislate to ensure that non-compete clauses no longer act as a barrier to recruitment by promising start-ups and growing businesses. 

What might change?

The Government has not yet set out exactly what the new law will look like, and the Prime Minister stopped short of announcing an outright ban on non-compete clauses.

However, a Government working paper published in November 2025 considered a number of possible approaches to reform, including:

• placing a statutory limit on the length of non-compete clauses;
• banning non-compete clauses altogether;
• banning their use for employees earning below a specified salary threshold;
• requiring employers to compensate employees while they are subject to a non-compete restriction; and
• applying different rules depending on the size of the employer.

The issue is not new. In 2023, the previous Government proposed limiting non-compete clauses in employment and worker contracts to three months, but that proposal was not implemented before the 2024 general election.

What should employers do now?

For now, the law has not changed. The Government has announced its intention to legislate, but the detail of the reforms has not yet been published. Employers can therefore continue to use appropriately drafted non-compete clauses - their enforceability will depend on whether the particular restriction is reasonable and necessary to protect a legitimate business interest.

There is no need for employers to make immediate changes to their employment contracts. However, employers that regularly rely on non-compete clauses may want to consider how they would protect their business if the use of those clauses is restricted in future.

This might include reviewing:

• confidentiality and intellectual property provisions;
• notice periods and garden leave clauses; and
• other post-termination restrictions, such as non-solicitation and non-dealing clauses.

Further details may be provided within the Chancellor's Budget on 28 October 2026. Until the Government publishes its proposals, employers should keep developments under review rather than make wholesale changes to their contracts