The Competition and Markets Authority (CMA) has increased its focus on how businesses compete for talent, as discussed in our recent GT Alert, “Talent Wars: How Competition Laws Apply to UK Recruitment.” Against this backdrop, on 26 November 2025, the UK government published a working paper inviting views on potential reforms to noncompete clauses in employment contracts. Responses are due by 18 February 2026.
This working paper forms part of the government’s broader agenda to improve labour market dynamism, strengthen competition for talent, and support start-ups and scale-ups. It seeks evidence on whether the widespread use of noncompete clauses restricts mobility, suppresses wages, reduces knowledge diffusion, and constrains the creation of new businesses, particularly for lower-paid workers, who may be deterred from challenging unenforceable clauses.
This GT Alert summarises the current legal framework for noncompete clauses, the UK government’s options for reform, and the potential implications for employers.
Current Legal Framework
Noncompete clauses restrict a worker’s ability to join or establish a competing business after leaving employment. Under English law, such clauses are unenforceable unless they go no further than reasonably necessary to protect a company’s legitimate business interests. Despite this, their use remains commonplace, with around five million workers across a broad range of sectors currently subject to such clauses.
Whilst employers often rely on noncompete clauses to protect confidential information, customer relationships, and key employees, the government notes that these benefits must be balanced against evidence suggesting such clauses may reduce labour mobility and weaken competition. The working paper therefore seeks views on whether statutory intervention is appropriate.
UK Government’s Options for Reform
The working paper sets out five principal options:
- A statutory limit on the length of non-compete clauses, for example, capping them at three months. The working paper also seeks views on alternative limits such as one, six, or 12 months.
- Different statutory limits according to company size, for example, a three-month limit for companies with more than 250 employees and a six-month limit for companies with fewer than 250 employees. The working paper also invites views on alternative thresholds, such as 50 employees.
- A complete ban on noncompete clauses, making them unenforceable. This might increase worker mobility, support start-ups and innovation, and encourage employers to rely on alternative protections such as confidentiality clauses, non-solicitation clauses, or paid gardening leave.
- A ban below a salary threshold, preventing the use of noncompete clauses for workers earning below a defined level, whilst higher earners may still be subject to reasonable restrictions.
- Combining a ban below a salary threshold with a statutory limit of three months, for those earning above the threshold. Noncompete clauses would be eliminated for lower-paid workers, whilst restrictions would still apply for higher earners.
The government is also seeking views on whether the potential cost of challenging noncompete clauses in court discourages claims, and how access to mechanisms such as fixed recoverable costs, legal expenses insurance, or conditional fee arrangements might be improved to reduce financial barriers for workers.
Practical Considerations for Employers
Employers may wish to:
- Review existing restrictive covenants, including their current use of noncompete clauses.
- Assess whether confidentiality, non-dealing, or non-solicitation clauses may provide sufficient protection.
- Identify roles where non-competes are most critical, in case caps or bans are introduced.
- Consider submitting responses before 18 February 2026.
Conclusion
The UK government’s working paper signals a potential shift in the regulation of non-compete clauses. The options range from time-limited use to a complete ban, each with implications for recruitment, retention, and post-termination risk management. Employers should monitor the consultation closely and begin assessing how potential reforms may affect their contractual arrangements and workforce planning.