Banks, hedge funds and consulting firms have urged Andy Burnham to adjust the rules on non-compete clauses rather than scrap them, after the prime minister pledged on Friday to legislate so that the clauses no longer act as a barrier to hiring at start-ups and scaling firms.
TheCityUK, which represents some of Britain’s largest financial groups, said the changes could not come “at the price of undermining Britain’s world-class financial and related professional services companies”.
Non-compete clauses prevent workers from joining a rival business for a set period after leaving a company. Many businesses use them to discourage their most valued employees from moving to competitors.
Speaking at the Innovation Nation Summit in Manchester on Friday, Burnham said the use of non-compete clauses had “gone too far” and described them as a “drag on innovation”.
“We need our innovators to be able to move freely between companies and start their own without constraint,” he said.
According to the official transcript of the speech, he told the audience: “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 startups and scaling firms.”
He said the government would also ensure that workers in “the foundational economy, the everyday economy” were not prevented from moving jobs, and would “bring forward options to address the wider use of restrictive practices”. The speech did not set out the scope of the legislation or a timetable.
Burnham believes the practice is holding back growth by keeping some of the country’s most talented and productive people out of the economy for months at a time.
A government working paper published by the Department for Business and Trade in November 2025 estimated that around 5 million employees in Great Britain work under contracts containing a non-compete clause, with a typical duration of about six months. The paper cited polling showing that some clauses have lasted up to 24 months.
The working paper sought views on options including a statutory limit on the length of the clauses, an outright ban and a ban below a salary threshold. It closed for responses on 18 February 2026. In May 2023 the previous Conservative government said it would cap non-compete clauses at three months, but the working paper notes that no action was taken.
Several City lobby groups have said they support reform of the current rules but urged Burnham not to scrap the clauses altogether.
“While we understand what the government is trying to do with these proposed changes, they cannot come at the price of undermining Britain’s world-class financial and related professional services companies,” said Miles Celic, chief executive of TheCityUK.
“There shouldn’t be a ‘one size fits all’ approach which will risk dampening innovation and undermining the UK as a global hub for talent. The consequences of not finding a workable solution will ultimately be to damage and undermine a major British national economic asset.”
Business groups said non-compete agreements were necessary to protect commercially sensitive information. The CBI said it had not seen any “compelling evidence that non-compete clauses are a drag on innovation or a material hindrance on labour market mobility”.
Tamzen Isacsson, chief executive of the Management Consultancies Association, which represents dozens of consulting firms, said non-competes helped to “safeguard confidential client data, protect intellectual property and prevent the misuse of sensitive commercial insights”.
She accepted that the government could provide “clearer, more proportionate rules” so that restrictions applied only to “genuinely sensitive roles”.
The chief executive of one start-up professional services company said: “You need to be able to protect legitimate business interests, but the definition of competitor is so wide that it catches pretty much whatever [the employer] decides.”
Partners also called for the rules to be the same for partnership agreements and regular employment contracts. “We need a level playing field,” one senior partner at a consulting firm said.
Business groups have also been lobbying on other changes to employment law, with the Institute of Directors last week calling for the Employment Rights Act timetable to be slowed.
