UK to Curb Non-Compete Clauses After AI Startups Complain

The UK government is preparing to restrict non-compete clauses: employment contract terms that require an employee to wait out a set period before joining another employer or founding their own company. Burnham announced the plan, Bloomberg reports. The trigger was criticism from tech and AI startups. The published announcement contains no figures: no maximum length for the waiting period, no effective date, and no form for the reform.

What we know so far

The facts are still thin. The government acknowledges the problem and promises to "rein in" a practice that, according to the source, has angered British tech startups. It is unclear whether this will be an outright ban, as in California, or a cap on the length of the restriction. It is also unclear whether the reform will affect contracts that have already been signed.

The background matters here. The idea of limiting non-compete clauses in the UK has been discussed for years. In 2023, the government of the day announced its intention to cap them at three months, but it never became law. Subsequent consultations also failed to produce a quick result. The current statement looks like an attempt to finally bring the issue to a decision.

Why this matters especially for AI

In the AI industry, a company's value often rests on a few dozen researchers and engineers. When one of them leaves, they take with them the knowledge of how to train models, build infrastructure and optimize inference. That is why large labs guard their staff fiercely. Waiting periods of several months, sometimes up to a year, are often combined with "garden leave": the person stays on the payroll and gets a salary but is not allowed to work.

For a startup, this arrangement creates three problems:

• It cannot hire a strong specialist quickly: the candidate is "frozen" for six months or more, while the AI market moves faster than that.
• Founders leaving labs and big tech companies cannot quickly launch their own company.
• It cannot compete on pay with those willing to fund the waiting period while the candidate produces nothing.

As a result, talent flows to jurisdictions where people can start work immediately. California has long refused to recognize such clauses, and San Francisco beats London precisely on speed. A US attempt to introduce a nationwide ban through the FTC stalled in the courts in 2024, so in the US the issue remains mostly at the state level.

What remains unknown

It is not yet clear how much the reform will change the picture. The main questions:

• Maximum length of the waiting period: three months, as previously proposed, or less?
• Exceptions: will the clauses remain for senior executives and for cases involving trade secrets?
• Mechanism: a law, amendments to employment rules already under discussion, or voluntary codes?
• Transition period: how much time will employers get to revise their contracts?

The answers will determine whether rank-and-file engineers feel the difference or only startup founders do. The boundary with trade secret protection and non-solicitation of clients also matters: employers will most likely strengthen those tools if the non-compete period is shortened.

Practical takeaways

Founders of British AI startups should review their own contract templates now: long waiting periods for employees will become a legal and reputational risk. Anyone hiring people from large labs should check the terms of their current contracts in advance and build a timing buffer into the hiring plan until the rules are settled. Investors and lawyers should watch for the publication of the reform's details, because they will determine how well London can compete with California for founders and researchers. Until the wording is published, existing clauses remain in force.