UK Plans to Curb Non-Compete Rules That Angered AI Startups

The UK is set to curb hiring restrictions that force employees to wait before moving jobs or starting companies, an issue that has drawn the ire of the nation’s technology startups.

The Labour government plans to introduce new laws around hiring “to make sure non-compete clauses will no longer be a barrier,” Prime Minister Andy Burnham said on Friday in Manchester.

“I believe some businesses have gone too far in their use of restrictive practices such as non-compete clauses,“ he added in broadcast remarks. “That’s a drag on innovation and prevents the best really being energized and bringing that dynamism to the economy.”

British entrepreneurs have complained about contractual restrictions that enforce a long waiting period for new hires from bigger rivals. It’s a particular concern for artificial intelligence startups, which are competing fiercely for expensive engineers. Inherent Labs, an AI startup founded by alumni of Google DeepMind, published an open letter last month signed by 20 founders calling for an end to practices such as non-competes, lengthy notice periods and garden leave.

California does not enforce non-compete clauses, which UK startups and investors said puts them at a disadvantage.

“This move accelerates the UK’s ability to be at the forefront of the AI wave,” said Matt Miller, founding partner of venture firm Evantic Capital.

The tech industry has been waiting for more clarity on the sector from Burnham, who reorganized the department for tech and science soon after taking office. Dom Hallas, executive director of the Startup Coalition lobby group, said the new policy change can “materially impact” the UK’s economic growth.

Along with the policy on non-competes, the UK will look at tackling other restrictions such as long notice periods, AI minister Kanishka Narayan said in a post on X on Friday.