Andy Burnham has promised to curb companies' ability to restrict what their workers can do after leaving their job. In a speech, the prime minister said the use of non-compete clauses in employment contracts had gone too far and was holding innovative UK companies back.
He added the clauses had forced workers to go without pay after leaving a role, as well as making it harder for growing firms to hire new staff. Ahead of the Budget later this month, he also said there was more to do on tax to encourage promising firms to stay in the UK.
The government had been exploring possible restrictions on non-compete clauses since late last year, including a total ban, banning them above a certain salary threshold, or limiting how long they can last. Although commonly associated with the financial services and technology sectors, research cited by the administration has estimated around five million jobs in Britain are covered by the clauses, typically lasting around six months.
Speaking at a business summit in Manchester, Burnham confirmed his administration would press ahead with new legislation to ensure the clauses can no longer be a barrier to hiring new staff. He added that their use had stopped workers leaving to join other companies, or founding their own firms instead, noting that it acts as a drag on innovation.
Referencing a landmark 1995 court ruling credited with revolutionising the football transfer market in Europe, he said he hoped reining in non-compete clauses could prove the Bosman ruling for the innovation sector. Burnham did not specify the exact scope of the restrictions he is planning, but suggested they would apply to the everyday economy as well as helping promising start-ups and scaling firms.
It is understood that the government is planning to unveil details of the proposed restrictions alongside the Budget on October 28. The previous Conservative administration had ruled out a total ban on non-compete clauses after hearing from employers that it could reduce investor confidence in the UK or prompt companies to tighten how they share information internally.
The prime minister sought to frame the announcement on non-compete clauses as part of a wider government pitch to boost innovative sectors of the economy. He told the summit that although the UK was home to outstanding research and start-ups, too many companies had gone abroad in search of investment.
He also signalled that the government would say more at the Budget about plans to use public investment as a way to encourage private funding in the economy. He added that he wanted all UK regions to have a dedicated fund to do this, modelled on the Good Growth Fund launched in Greater Manchester previously.
He also hinted that the government was looking at adjusting the tax system to ensure the UK can retain high-growth companies. He noted that one of the biggest challenges is breaking through the domestic ceiling, as too often the best ideas are developed and scaled overseas, taking jobs, technology, and investment with them.