Burnham vows to legislate against non-compete clauses that hold back UK start-ups

The pledge

Andy Burnham used a speech at the Innovation Nation Summit in Manchester on Friday to confirm that his government will legislate against non-compete clauses in employment contracts. The Prime Minister said the clauses had 'gone too far' and were holding innovative UK companies back. Burnham said the clauses forced workers to go without pay after leaving a role, and made it harder for growing firms to hire new staff. POLITICO first reported the planned crackdown on Thursday, after intense lobbying from the startups sector. Burnham stopped short of committing to a total ban, and the scope of the new rules will be set out later, ahead of legislation.

So 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.

Scope and scale

The government had been exploring possible restrictions since late last year, including a total ban, a ban above a certain salary threshold, or limits on how long the clauses can last. Research cited by the government estimates around 5 million jobs in Britain are covered by the clauses, which typically last around six months. Non-compete clauses are commonly associated with financial services and technology. Burnham added that workers in the foundational economy and the everyday economy would also not be prevented from moving jobs. Ahead of the Budget later this month, he said there was 'more to do' on tax to encourage promising firms to stay in the UK.

Bosman comparison

Burnham compared the plan to the 1995 ruling credited with revolutionising the football transfer market in Europe, and said he hoped reining in non-compete clauses could prove the 'Bosman ruling for the innovation sector'. The Bosman ruling was a European Court of Justice case that paved the way for out-of-contract footballers to move freely between clubs. Burnham said non-compete clauses stop workers joining a rival organisation or setting up one of their own after leaving a role. He called that a drag on innovation and said the clauses stunt innovation and trap workers.

Call it, if you like, the Bosman ruling for the innovation sector, but I think it's needed and long overdue.

Wider innovation agenda

Burnham announced three measures to make the UK a world-leading 'innovation nation': devolving funding for innovation, identifying clusters with the potential to become world-leading, and pressing for more collaboration between clusters. He said these could let the UK begin to 'punch above its weight'. He set an ambition for a scientific breakthrough within the next decade, naming cancer, dementia and nuclear fusion as potential areas. Gordon Brown made a similar case in a Guardian column, arguing that the UK is home to four of the world's top 10 universities and produces 6% of the world's research papers with less than 1% of the world's population. Brown pointed to new polling for this week's conference, and the results are shown below.

Brown wrote that moving Britain to Swedish or Japanese levels of innovation intensity would, over time, leave every household £5,000 better off.

Open questions

A Telegraph column headlined 'Aligning with failing Europe is no panacea' argued that freedom is Britain's great post-Brexit asset and that the EU's sclerotic bureaucracy is its antithesis. The scope of the non-compete rules and the legislative timetable have not yet been set. The next fiscal test is the Budget later this month.