Midday Markets: Burnham’s welcome crack down on pesky non-competes
The Midday Market report is a new newsletter from City AM, giving you fresh analysis on the City’s biggest stories straight into your inbox every lunchtime. Today, Ali Lyon outlines the positive case for Andy Burnham’s clampdown on non-competes and lengthy notice periods.
You know something is wrong with the upper end of Britain’s labour market when some of the country’s most promising companies find it is easier to relocate top talent from America than hire from our own shores.
But those are exactly the lengths to which one founder told me he and his fellow UK tech entrepreneurs are regularly going to take on high-skilled engineers quick enough to fuel their companies’ rapid growth.
The rise in this sub-optimal practice is not, you will be relieved to read, for a lack of high-functioning, high-IQ minds being churned out by our universities.
The culprit, in fact, is the thicket of draconian, anticompetitive clauses that employers are minded to slap on the contracts of their brightest and best.
Speaking to City AM’s Saskia Koopman last month, Fuse Energy boss Alan Chang lamented the practice as “another barrier to building generational companies here”. The upshot, he said, is that his energy disruptor, and the country as a whole, can’t grow as quickly as they otherwise might.
Well, this morning, Andy Burnham and his business secretary Jonathan Reynolds have heeded those warnings – and not a moment too soon. During a speech in his spiritual home of Manchester, he vowed to clamp down on pesky non-compete agreements and lengthy notice periods in a move that should inject a bit of much-needed dynamism into the upper end of the UK’s jobs ecosystem.
Are non-competes preventing the next Revolut?
I make no apologies when I say that the issue of excessively long non-competes has become something of a cause celebre for City AM over the past few months.
And the rationale for that is quite simple. Sadly, Britain can’t claim to be genuinely world-leading in many corners of industry in today’s hypercompetitive global economy. But one bright pocket where we can go toe-to-toe against pretty much anyone is… brains. Few places, if anywhere, can lay claim to the volume of scarily clever people that currently reside in the ‘golden triangle’ between London, Oxford and Cambridge.
Just the other day, I was speaking to a fascinating founder called Alex Fitzgerald (full profile of him and his company Isembard to follow next week) who hailed London and the South East as “the best place in the world” to find manufacturing engineers, robotics engineers and software engineers in one place. Not to mention the legal, marketing and sales gurus also needed to run his high-precision manufacturing firm. In America, by comparison, that talent is spread out across many of their sprawling 50 states.
And yet, because of arcane and anachronistic employment practices, in the UK, we have failed to capitalise fully on the nascent potential that talent holds. People with brains the size of Mars – ready to build the next Revolut – are often hamstrung from doing so because their contract at a big bank or hedge fund prevents it. Just as common, are the mind-bogglingly long notice periods to which top talent are held: do we really want individuals who, single-handedly, produce millions of pounds-worth of economic activity a single month to be idling around on gardening leave for over a year?
For those who care deeply about the health and dynamism of the UK economy, there has been no shortage of underwhelming announcements to come from the early days of Burnham’s premiership. Today’s move on anti-competitive non-competes, however, should be cheered.