UK Prime Minister Andy Burnham has announced plans to potentially ban, or at least limit, non-compete clauses in the UK, following a campaign by both startup lobbyists and AI startups to remove employment restrictions they said were holding back British innovation. The proposals previously sparked a backlash from some quarters, who warned that banning non-competes could hurt smaller startups that competed with larger, well-funded ones.
At an event today, Burnham said he will limit non-compete clauses in employment contracts: “Non-compete clauses will no longer be a barrier to hiring for our most promising start-ups.”
Burnham described the proposed reform as the “Bosman ruling for the innovation sector”, jokingly referring to the landmark football ruling that transformed football player transfers.
Non-compete clauses can prevent employees from joining competitors or launching rival businesses after leaving a company. Critics argue they restrict the movement of skilled workers and stifle innovation, particularly in fast-moving sectors such as AI startups.
The Government will set out its proposals at the Budget on 28 October, with a consultation and legislation expected to follow. It will also examine other restrictive employment practices, including gardening leave.
Today, Startup Coalition, which has pushed for reforms, welcomed Burnham's announcement but acknowledged concerns about striking the right balance between employee mobility and legitimate protections for employers.
The thinktank and lobbyist for UK startups argues that talent mobility helped create Silicon Valley's technology giants, from Fairchild Semiconductor to the so-called PayPal Mafia, and could similarly accelerate Britain's emerging AI ecosystem: “We’ll be making the case that reform should cover the whole playbook of restrictions on talent, not just a single clause,” it said in a statement.
The scope of the reforms, including any exemptions and restrictions on notice periods and gardening leave, will be looked at during the consultation.
The announcement by Burnham follows the launch of “Free to Start and Scale”, an open-letter campaign spearheaded by London AI startup Inherent Laboratories and backed by figures from companies including many of the UK’s biggest AI startups such as ElevenLabs, Synthesia, Fractile, CuspAI and Fuse Energy.
The campaign argued that California's more permissive approach to labour mobility gives Silicon Valley an advantage in attracting talent and creating new companies.
It called for a ban on lengthy post-employment restrictions and limits on extended notice periods and gardening leave, warning that employers could otherwise circumvent a ban on non-competes.
However, the campaign also exposed divisions within Britain's startup ecosystem.
After the open letter was announced, Anthony Rose, co-founder and CEO of legaltech platform SeedLegals, vehemently attacked the proposals on LinkedIn, calling them “an incredibly bad idea” and urging the Government to reject them.
Rose argued that heavily funded AI companies could use the reforms to poach talent from smaller, less well-funded startups, driving up salaries and disrupting their operations.
“Every early-stage startup founder lives in mortal fear of some newly highly funded company stealing their developers,” he wrote.
He also defended notice periods and other contractual protections, arguing that startups need certainty when planning around the departure of senior staff.
Rose said technology workers already have considerable negotiating power and should be free to agree employment packages covering salaries, share options, notice periods and non-competes.
He characterised the campaign as the latest example of a wave of well-funded technology companies seeking to recruit talent from the wider startup ecosystem, warning that it could ultimately create disruption even among the companies backing the reforms.
The UK Government’s consultation will have to weigh up the pros and cons of freeing up talent to move between companies, and protecting smaller