Burnham’s non-compete crackdown sets up a fight with the City

Andy Burnham has pledged to legislate against non-compete clauses in employment contracts, reopening a dispute with London’s financial sector, which has argued for most of the past year that restricting the clauses would push jobs and investment abroad.

Speaking at the Innovation Nation Summit in Manchester on Friday, the prime minister said the government would act. “I can confirm today we will legislate to make sure that non-compete clauses will no longer be a barrier to hiring for our most promising start-ups and scaling firms,” he said. He called the measure the “Bosman ruling for the innovation sector”, a reference to the 1995 European court judgment that let footballers move freely at the end of their contracts. By Monday the Financial Times was reporting criticism of the plan from the City.

The scope of the reform will decide how far it reaches. Burnham gave no details of the changes. His wording pointed to start-ups and fast-growing companies, but the clauses he criticised are common across professional services and are especially entrenched in finance. The Budget on 28 October is expected to open a consultation on a wider set of restrictive practices, including gardening leave, with a timetable for legislation in the months that follow.

A non-compete clause bars an employee from joining a rival, or starting one, for a set period after leaving a job. There is currently no statutory limit on how long a non-compete can last or how widely it can apply; courts decide case by case whether a clause is reasonable. Burnham framed the problem in terms of workers’ pay as well as innovation. “They are often held back and unpaid during the time they have to sit out on the sidelines, and it does, as I say, stunt innovation and trap workers,” he said.

The pledge follows a campaign by technology companies including ElevenLabs and Synthesia to limit non-competes and long notice periods. Dom Hallas, chief executive of the Startup Coalition trade body, called it “a huge move”. Employers have been enforcing the clauses more often. High Court claims to enforce non-competes rose 43% in the first nine months of 2025, according to the law firm Kingsley Napley.

The proposal is not new. A Conservative government consulted on the issue in December 2020 and proposed a three-month cap in 2023. In November 2025, Keir Starmer’s government published a working paper alongside the Budget that set out several options: a cap on duration, a salary threshold below which non-competes could not be used, a requirement to pay employees for the duration of any restriction, and an outright ban.

The last option alarmed the finance industry. Hedge funds and alternative investment managers have been among the most vocal critics. The Alternative Investment Management Association (AIMA), the hedge fund industry’s trade body, warned that the plans risk undermining Britain’s competitiveness at a time when financial centres are competing hard for high-value jobs. Its chief executive, Jack Inglis, said radical restrictions or a ban could lead firms to move roles and investment to jurisdictions with stronger protections.

TheCityUK, which represents financial and professional services, argued in its response to the working paper that reasonable non-competes remain enforceable in rival centres, including New York, Delaware, Singapore, Hong Kong and Dubai’s financial free zone. The industry case rests on protecting confidential information. Firms argue that client relationships and trading strategies can leave with a single employee, and that some restrictions in asset management run to two years or more. Disputes involving Brevan Howard, Walleye Capital and Jump Trading show how hard such provisions are defended, particularly in algorithmic trading, where models are easy to carry from one firm to another.

Opinion within the industry is not uniform. Izzy Englander, founder of Millennium Management, has criticised long clauses for inflating pay and creating what he calls a “talent bubble”. Ken Griffin of Citadel has lobbied for longer non-compete periods in the United States.

Employment lawyers expect firms to adapt if the clauses are curtailed. They predict greater use of longer notice periods, garden leave, deferred compensation and stricter non-solicitation clauses. Those tools may themselves come under review if the consultation covers gardening leave, as Burnham indicated. For now, some lawyers are advising employers to keep using non-competes where appropriate until the scope of any legislation is clear.

The central question for the City is whether the law will apply only to start-ups and scale-ups, as Burnham’s speech suggested, or to every employer. The government is expected to say more in the Budget on 28 October.