Hedge funds and banks have criticised Andy Burnham’s proposal to end non-compete clauses in employment contracts, warning it risks “throwing the baby out with the bathwater” and could harm UK firms’ competitiveness. The prime minister said the government will legislate to ensure non-compete clauses no longer hinder hiring for promising start-ups and scaling firms. Burnham’s plan, which restricts clauses that prevent workers from joining competitors after leaving a job, has been welcomed by tech groups but triggered backlash in the City of London.
John Godfrey, managing director at The City UK, said members are “very disappointed” and fear damage to UK financial and professional services. Many City firms, including hedge funds, investment banks and wealth managers, rely on non-compete agreements to stop star traders, money managers and dealmakers being poached by rivals. Burnham called the practice “a drag on innovation” and said innovators must be able to move freely between companies or start their own.
Supporters argue non-competes protect intellectual property, client relationships and training investment. Jiří Król of the Alternative Investment Management Association warned the UK government risks undermining the tech sector’s support. Jillien Flores of the Managed Funds Association said non-compete agreements are vital for protecting proprietary investment strategies in alternative asset management.
Godfrey suggested firms might respond by extending notice periods instead, and stressed any changes should apply only to new contracts. A review launched under Sir Keir Starmer last year considered options from an outright ban to a three-month limit. UK tech founders had urged ministers to limit non-competes and extended notice periods, arguing they hinder competition with Silicon Valley.
California bans non-competes, and the US FTC backed a nationwide ban in 2024 before reversing after a Texas court challenge. The UK government said it wants the UK to be the best place for firms to start, scale, list and stay, and that removing non-compete barriers is key to hiring top talent. It added that backing the financial sector is equally critical, citing pension reforms and listing rule overhauls to boost competitiveness.
Officials aim to release more reform details soon.
Source: Financial Times Companies · Summarized by HeadlinesBriefing