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Boohoo under fire, over 1.1 billion pounds wiped off company value

By Don-Alvin Adegeest

Jul 7, 2020

Boohoo has come under intense scrutiny in the past week, despite sales soaring during the pandemic.

At the end of June the company announced a controversial payout scheme which would see its management team net 150 million pounds. Earlier this week allegations of modern slavery surfaced, pertaining to one of its Leicester suppliers, which subsequently wiped over one billion pounds off the company’s value. The allegations, which were published in an undercover report led by the Sunday Times, also found factory workers were not be wearing personal protective equipment, leaving a possible threat of spreading the coronavirus.

In a response to the Times investigation Boohoo said it remains committed to supporting UK manufacturing and is determined to drive up standards where this is required. This comes as the report revealed factory staff were paid 3.50 pounds per hour, less than half the minimum wage of 8.72 pounds.

In press release response Boohoo said: “we will not hesitate to immediately terminate relationships with any supplier who is found not to be acting within both the letter and spirit of our supplier code of conduct. This includes very clear expectations on transparency about second tier suppliers.”

Labour Behind the Label, a campaign that works to improve conditions and empower workers in the global garment industry, said in a report in June it found emerging evidence indicating conditions in Leicester’s factories, primarily producing for Boohoo, are putting workers at risk of Covid-19 infections and fatalities.

Sweatshops in Leicester

“For several years, numerous media reports have detailed illegal practices at Leicester-based garment factories linked to big brands. As a result, many brands have switched to sourcing elsewhere. Only a few remain. The largest of these is Boohoo and its sister brands which dominate the local industry. Boohoo has been operating throughout the crisis and has stopped responding to our requests for details of their measures to protect workers during the Covid-19 crisis.”

Generally, Boohoo Group Ltd accounts for almost 75–80 percent of production in Leicester and sources around 60–70 percent of its production from Leicester. This has reportedly increased in recent weeks to around 80 percent.

Most garment workers in Leicester are from minority ethnic groups, with around 33.6 percent born outside the UK, such as India, Pakistan, Bangladesh and increasingly Eastern Europeans. These workers are vulnerable as a result of their immigration status, language skills, integration in the as well as higher unemployment rates.

On Monday a FTSE firm was quoted in This is Money that ‘no other major High Street retailer’ has been prepared to work with Leicester suppliers for at least three years amid concerns over pay and conditions.

From March to June, Boohoo’s share value increased from 157p to 412p last week, before a near quarter (1.1 billion pounds) was wiped from the company on Monday, now valued at 296.7p per share.

As one rival fashion executive told This is Money: ‘Yes consumers will notice, they have to.’

Image via Boohoo PLC; Article sources: Labour Behind the Label, The Guardian, The Sunday Times.