Australia plans to ban most non-competes, so British employers should stop relying on them

A common-law peer is moving to ban them

Australia's labour law shares its roots with Britain's, which makes its decision worth watching. The joint ministerial release from the Treasury and employment ministers sets the ban threshold at the Fair Work Act high-income threshold of AUD 190,100. It cites research by the e61 Institute finding that one in five Australian workers are subject to a non-compete, and that a ban could lift affected workers' wages by up to four per cent, about AUD 2,500 a year for a typical worker. The government will also consult on banning co-worker non-solicitation clauses, no-poach and wage-fixing arrangements and cascading restraint clauses, alongside exemptions to protect legitimate business interests. Submissions closed on 2 October 2026.

The underlying research is not new. The e61 Institute's 2023 note found at least one in five Australian workers bound by such clauses, including many low-wage workers, at levels similar to the United States. It also summarised American evidence that fewer than 10% of workers negotiate higher pay in exchange for a non-compete, and that 40% of workers had turned down an offer from a competitor because of one.

Britain uses non-competes more widely than many assume

The UK picture is, if anything, starker. The Department for Business and Trade's working paper on reform, issued on 26 November 2025 with responses due by 18 February 2026, reports that around 5 million employees in Great Britain work under a contract with a non-compete, typically lasting around six months. It cites London School of Economics research finding that around 26% of UK workers are subject to them, higher than comparable American and European surveys. Research by the Competition and Markets Authority, it notes, shows the clauses are common in lower-paid jobs, with 20 to 30% of workers in such roles believing they are covered.

The government is now considering four options: a statutory limit on length, an outright ban, a ban below a salary threshold, or a threshold ban combined with a limit. This is not the first attempt. In May 2023 the previous government's response to its consultation committed to a statutory limit of three months on non-competes in employment contracts. That limit is not in force, and the new paper reopens the full range of options.

Most of these clauses would not survive a challenge

The legal position already favours employees. As the working paper explains, a non-compete, like any restraint of trade, starts from being unenforceable unless the employer can show it is reasonable, which a court decides only if it is challenged. The government's concern is the behavioural effect. Even a broadly drafted clause that is unlikely to be enforced can make workers believe they are bound. A YouGov survey cited in the paper found around half of respondents thought their employer was likely or very likely to enforce one.

For a small or mid-sized British firm, this is the worst of both worlds. A standard non-compete in a junior contract probably gives little legal protection, yet it costs something real: it signals mistrust to candidates, can put off the experienced hires a growing company most needs, and invites a dispute the employer may not win.

Mobility is the cost the economy bears

The working paper's macroeconomic case is direct. It states that around 60% of the fall in trend UK productivity growth since 2008 is attributable to reduced movement of capital and labour between firms and sectors, and that non-competes are known to limit worker mobility. It cites a 2021 study finding that stronger enforceability reduced employees' earnings by as much as 4%, and notes that start-ups may struggle to hire experienced people who have signed restrictions, lacking the resources to challenge them.

A British software house, consultancy or engineering firm is usually on both sides of this. It wants to keep its own people, but it also wants to hire the best from larger rivals. The clauses in other employers' contracts make its own recruitment harder.

The strongest objection is that non-competes protect investment in people

The fair objection is that non-competes let employers train staff and share client relationships without fear that a rival will simply hire them away. The working paper itself acknowledges this. It cites a 2019 study linking a move from no enforcement to average enforceability with a 14% increase in training aimed at upgrading skills, and notes that average training days per employee in England fell by 19% between 2011 and 2022. For a small professional services firm, one departing account manager taking a large client can be a serious blow.

That concern is real, and it is why this column does not argue for dropping every restriction. But a non-compete is a blunt tool for the job. The interests most employers actually need to protect are confidential information and client relationships, and both can be protected more precisely. The Trade Secrets (Enforcement, etc.) Regulations 2018 already give remedies for misuse of information that is secret, commercially valuable because it is secret, and protected by reasonable steps. A clause preventing a departing employee from dealing with clients they personally handled, for a limited period, addresses the client risk directly. Garden leave during a notice period keeps a senior person out of the market while they are still paid. For the small group of people who hold genuinely sensitive knowledge, a short, well-drafted non-compete may still be justified. For everyone else, it mainly adds risk.

Firms that drop the clauses can recruit with it

There is also a commercial upside. A firm that tells candidates it does not use non-competes below senior level is offering something many rivals do not. Australia's reform, and Britain's open working paper, suggest the direction of travel. Employers that change early can do it on their own terms, with time to tighten confidentiality and client protections, rather than being forced to rewrite every contract at once when legislation arrives.

What a UK employer should do in the next three months

By the end of January 2027, the HR lead or managing director should list every contract template that contains a non-compete and the roles it covers. Remove the clause from new contracts for all roles except a named group, such as directors and staff with documented access to trade secrets, pricing strategy or key client relationships.

For that group, take legal advice to keep any non-compete short, specific to the business and geography, and supported by garden leave. For everyone, strengthen confidentiality clauses, write down what the firm treats as confidential, and take reasonable steps to protect it, such as access controls, so that the 2018 regulations can apply. Where client loss is the main risk, use a limited non-dealing clause covering clients the employee actually worked with.

Finally, tell existing staff whether their current non-compete will be relied on, and watch for the government's response to the working paper. Australia's consultation on co-worker non-solicitation clauses is a reminder that wider restrictions may be next, so keep any remaining covenants narrow. An employer that protects what matters precisely is better placed than one relying on a clause it may never be able to enforce.