Is it normal for the client to own all IP for work created by a software contractor?

The author owns copyright except in “work for hire”

A truly independent contractor (not an employee that is called a contractor) is not engaged in work for hire and owns copyright in the code they create.

In jurisdictions where copyright can be transferred then the contract can do that. Who owns the copyright is therefore a decision of the parties to the contract.

If the client owns the copyright then, yes, the contractor cannot copy it without permission. They can rewrite similar code that implements similar functions from scratch and it will, no doubt, look similar but that’s not a copy and doesn’t breach copyright law.

The customer will own exactly what is stated in the contract. As the contractor, who wants to be able to reuse code (which is in everybody’s best interest) you want to keep the copyright, with the client having the license to use the code any way they want. If the customer wants the copyright with the contractor losing all rights, that will be in the contract, and it will cost.

If the contractor produced an application that use lots of domain knowledge supplied by the client, that will often not give the client copyright, if the contractor is the one producing the actual expression of that knowledge by translating knowledge into code. If the client provides knowledge that is actually a trade secret, then an NDA should be signed. And again, it’s contracts. The client can put into the contract that their domain knowledge must not be reused. That is quite reasonable. The client might add to the contract that the contractor will not write software for any competitor. That is legal if it is in the contract, but it will cost.