Will new laws make it easier to start a business?

Thursday 28 April 2016

Leaving permanent employment to start your own business can be a big step at the best of times. However, it can be especially difficult when you find yourself dealing with non-compete clauses. Written into many permanent contracts, these prevent people from leaving to start companies that would be in competition with their previous employer.

Luckily, the latest news from the government suggests that this situation is likely to improve, as business secretary Sajid Javid has announced plans to look into the laws surrounding these clauses.

In the majority of cases, skilled workers looking to start a business will be doing so in the same sector as their previous employer. It is less usual to see contractors with two different skill sets developed enough to form a career around. As such, these non-compete clauses can be a significant barrier to potential entrepreneurs.

Often, the clauses are not able to be enforced. For example, someone leaving a large web development company to become a contractor is unlikely to attract the same clients as their former employer, so they are not realistically in competition despite being in the same sector. However, this may have to be proven in a court of law, and that can be an obstacle.

To tackle this, the government is launching a call for evidence asking for views on non-compete clauses. Before taking action, Mr Javid wants to be sure that the clauses are actually acting as barriers to entrepreneurship. However, the government has stated that it is committed to making the UK one of the most innovative places in the world.

In a statement, Mr Javid said: "Home to some of the most innovative companies in Europe, Britain is already ahead of the curve in many ways when it comes to driving forward new ideas.

"But I am clear that I want to see more enterprising start-ups and greater productivity in a free and fair marketplace, by making sure we take action to break down any barriers that are curbing innovation and entrepreneurship."

The government's call for opinions on non-compete clauses will be sent out to businesses and entrepreneurs. It will also send out an "innovation survey" to larger firms. Respondents will be asked about seven topics, including how regulation can be used to help business, and access to finance and data.

Emma Jones, founder of Enterprise Nation, said: "The UK continues to record over half a million start-ups being formed each year, with many people starting a business by holding onto the day job and building the business at nights and weekends. Entrepreneurial individuals need to be able to ease out of employment and into self-employment so a move to look into how employment contracts reflect this and the modern economy is warmly welcomed."


By Victoria McDonnell

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