British ministers are planning on blocking non-compete clauses to make ceasing employment with a business to set up rival companies easier in a bid to support British start-up businesses, particularly in the technology sector.
The government hopes that removing non-compete clauses will incentivise more start-up businesses. Credit: Jisc infoNet / Flickr
Officials hope the British tech sector will one day be able to stand up to Silicon Valley in the US, or the new wave of EU tech companies that may rise up in the fallout from the EU's suppression of Big Tech companies such as Google and Amazon.
The government is keen to curb so-called non-compete clauses in order to foster an entrepreneurial spirit within companies in the hope they may gain significant market value.
Typically, these clauses block former employers from competing against their former employers and may also prevent them from working for the same clients or helping rival companies for a time.
They feel these clauses stifle competition by disincentivising people from creating start-ups by thwarting plans to leave and start-up their own businesses.
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There is a fear this could encourage saturation of the market, but as of now, there is no evidence to support this.
In California, the removal of non-compete clauses has been linked as a primary factor in the success of the tech industry there.
The government hope similar steps could encourage the sector in the UK to sprout.
The UK has already taken steps to curb the power of US Big Tech companies, in line with a similar trend across Europe, by introducing taxes with a view to tackling unfair business practices.
Back in October, it was revealed Amazon had been effectively been avoiding paying the UK's digital services tax by charging third-parties who use their platform to cut their losses.
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A total ban on non-compete clauses is unlikely, but their application and enforcement may be targetted.
Companies are worried about potential leaks of company secrets by former employees, but there are already laws in place to prevent this.
There are also concerns Brexit may have an effect on the industry, owing to a large percentage of start-ups being set up by EU nationals hoping to benefit from the UK's more talented pool and its tax system.
Ministers generally agree that these clauses inhibit growth, however, some experts are convinced these clauses convince companies to hire new talent and invest in new technologies as they do not fear losing them to rivals.
However, these kinds of investments are key in business, regardless of market competition.
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