Outdated employment practices are “holding back Britain’s start-ups and scale-ups”

A group of technology companies have posted an open letter to the business department warning that action is needed on labour mobility in the tech sector, with the competitiveness of the UK’s start-up landscape said to be at stake.

The move comes as the government prepares its response to last autumn’s consultation on non-compete clauses, which sought views on different ways that the use of these measures in employment contracts could be changed, as part of a commitment to a “dynamic labour market that enables people across the country to seize the opportunities of employment and drives economic growth.”

Feedback was invited on proposals including a statutory limit on the length of such clauses, a complete ban, or the introduction of thresholds by company size or salary level. Today’s letter is firmly behind the move:

“British workers deserve the freedom to switch jobs and start innovative new companies. But a large and growing number are bound by unfair restrictions, ranging from lengthy notice periods to non-competes.”

However, it worries that action on non-compete clauses will lead businesses to rely more on other contractual restrictions, such as lengthy notice periods and gardening leave. It wants the business department to restrict the use of these as well, in order to avoid unintended consequences.

The previous Conservative administration consulted on reforming non-compete clauses in 2023 and announced that it would introduce a three-month limit – however, the ban was never introduced. Last autumn’s consultation by the Labour government references LSE research which found that non-compete clauses are more prevalent in the UK than elsewhere – various US states ban them outright – and a Competition and Markets Authority study which found they were more common in lower-paid roles than is generally imagined.