In brief
- The UK Government is considering reforms to non-compete clauses, including duration limits, salary thresholds and an outright ban, prompting concern across the financial services sector.
- Industry leaders warn that weaker protections could damage UK competitiveness and drive investment, jobs and talent to other jurisdictions.
- Our employer survey found that 41% preferred the current system, while 86% opposed an outright ban on non-competes. However, 59% of respondents supported some type of reform.
- Non-compete clauses are commonly used amongst financial services firms to strike an appropriate balance between employee mobility and business protection.
- In the meantime, many firms are lengthening non-compete periods and reviewing wider protections for key talent, client relationships and intellectual property.
On 26 November 2025, the Department for Business and Trade published a working paper exploring options for reforming non-compete clauses in employment contracts, with responses invited until 18 February 2026. Alongside a statutory cap on duration and salary-based thresholds, the paper floats an outright ban on non-competes — an option that has caused particular unease in sectors, including financial services, where effective post-termination restrictions are a core tool for protecting client relationships and proprietary trading strategies.
Over the months since publication, the proposals have remained squarely on employers' radar — and hedge funds and alternative investment managers have been among the most vocal critics.
In an article published by the Telegraph, Jack Inglis, chief executive of the Alternative Investment Management Association (AIMA) — which represents hundreds of hedge funds worldwide — described the Government's "radical" plans as capable of "weaken[ing] firms' confidence" in the UK, warning that without certainty over their ability to protect intellectual capital and client relationships, "high-value jobs and investment may simply flow to markets where protections are stronger." Other industry figures have echoed the concern, with one hedge fund managing partner warning that "a blunt instrument" applied to the industry "could do real harm to the City's edge."
We surveyed a cross-section of our employer clients to gauge reaction to the Government's proposals firsthand. The results show that the single most common preference (41% of respondents) was for the Government to maintain the status quo — under which parties remain free to negotiate the terms of post-termination restrictions themselves without statutory restrictions. However, 59% of respondents support some form of reform, indicating a diversity of opinion.
Among those in favour of change, opinion fragmented across the Government's various options: a straight limit on duration was the single most popular choice, favoured by 24% of all respondents, with a combined salary threshold and duration limit for higher earners the next most popular at 19%.
Tellingly, 86% of respondents opposed an outright ban, with most citing confidence in the existing legal framework — under which non-competes must already be reasonable and tailored to role and seniority — as sufficient protection.
The general pattern of opposing Government-imposed change is consistent with what we are seeing in practice within financial services specifically. One alternative investment firm respondent captured the prevailing view succinctly, noting that "the current position has balance," since parties are free to negotiate terms that can be tested against the facts of the case in court. Another alternative investment firm respondent went further, warning that a ban could push firms to reduce UK investment or relocate business to jurisdictions offering stronger protection. Notably, several respondents to our survey — including firms in the alternative investment space — warned that restricting non-competes could have the opposite of the Government's intended effect, discouraging rather than encouraging investment in the UK.
In the meantime, the trend we see is firms actually lengthening non-compete restrictions. In a market where the skills, relationships and market knowledge of individual portfolio managers are often integral to the success of a firm, there are strong commercial incentives to securing longer restrictions. Absent reform, we expect this trend to continue: the competition for talent among financial services firms shows no sign of abating, and hedge funds in particular continue to make substantial investments in building out pod-based trading strategies that depend on retaining key individuals.
The Government working paper closed to responses on 18 February 2026, and firms now await next steps. It is worth tempering expectations about timing. The previous Conservative Government's last consultation on the same subject was launched in December 2020, yet its response was not published until May 2023, and no legislative action followed before the 2024 general election. Financial services employers should not assume that any reform, if it comes, will happen quickly.
That said, this is not a wait-and-see moment. There are concrete steps employers can take now to stress-test their existing restrictive covenants and reduce their reliance on non-competes as a sole line of defence.
How Mishcon de Reya can help
We will continue to monitor developments in this area closely over the coming months and will update clients as soon as the Government indicates its intended direction. If you have questions about how these proposals might affect your business, please do get in touch with our Employment team.