An outright ban on non-compete causes in employment contracts is among the options proposed in a working paper published alongside yesterday’s budget. According to the consultation document, such clauses 'play a part in restricting employee movement, limiting knowledge spillovers and can undermine incentives for innovation'.

The document notes that under current law any clause in restraint of trade is unenforceable unless the employer can demonstrate it is reasonable. However 'even if broadly drafted and unlikely to be enforceable, workers may perceive the clause as binding and comply with it for fear of legal repercussions'.

According to the document, such clauses are not restricted to higher paid jobs: around 5 million employees in Great Britain work under a contract that contains a non-compete clause, with a typical duration of around six months. 

The options set out are:

  • A statutory limit on the length of non-compete clauses along the lines of a three-month limit proposed by the last government. However this could leave some lower-paid workers facing the possibility of spending up to three months unable to work in their area of expertise.
  • A statutory limit of on the length of non-compete clauses according to company size.
  • Outright ban on non-compete clauses, as in some US states. The document notes that the government would need to ensure that other restrictive covenants, for example non-dealing clauses, are not used in a way that would have a similar effect.
  • Banning non-compete clauses below a salary threshold.
  • Combining a ban below a salary threshold and a statutory limit of three months.

On the deterrent effect of legal costs the document cites the possibility of imposing fixed recoverable costs. 'This can help claimants make an informed decision about whether to pursue litigation.' It seeks views on whether the threat of legal costs present an obstacle to challenges and, if so, whether claimants have access to mechanisms such as fixed recoverable costs, after the event insurance or conditional fee agreements. 

 The consultation closes on 18 February 2026.