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UK fast-fashion company Boohoo has launched an independent investigation following allegations that workers in its supply chain were paid illegally low wages and suffered poor working conditions.
The online retailer, whose ability to churn out ranges quickly had turned it into one of the hottest investments on the UK stock market, said the investigation will be led by Alison Levitt, the former principal legal adviser to the Crown Prosecution Service.
The review will examine the compliance of Boohoo’s suppliers with regulations on minimum wages and working practices during the pandemic, the group said in a statement on Wednesday.
The market capitalisation of Boohoo, which was co-founded by Mahmud Kamani and Carol Kane, has plunged by more than a third since the allegations were reported in the Sunday Times. The shares tumbled a further 15 per cent in early trading on Wednesday.
Alongside announcing the independent investigation, Boohoo said it would invest £10m to “eradicate supply chain malpractice”.
“We are shocked and appalled by the recent allegations that have been made and we are committed to doing everything in our power to rebuild the reputation of the textile manufacturing industry in Leicester,” Boohoo said.
Investors have ditched Boohoo shares since it was reported that workers making garments for its Nasty Gal brand were paid as little as £3.50 an hour at a factory in Leicester displaying the name Jaswal Fashions.
The company said on Wednesday that its own investigation had found Jaswal Fashions had never been a supplier but that the Nasty Gal order was placed with another company that had the items manufactured by a subcontractor in Morocco and shipped back to the UK. Once back in the UK, they were “repackaged into compliant boxes” for delivery to a Boohoo distribution centre in Burnley.
Its own investigation had not discovered “evidence of suppliers paying workers £3.50 per hour”, but did find “evidence of non-compliance with our Code of Conduct” by the suppliers involved in Nasty Gal order and has terminated its contracts with them.
Analysts at Jefferies said the decision to launch an independent investigation was a “clear move back on to the front foot in addressing concerns about the UK supply base”.
On Tuesday, rivals such as Next, Asos and Berlin-based Zalando said they would temporarily drop Boohoo products from their websites, pending greater transparency into the UK brand’s supply chain.
Boohoo said it would “welcome the opportunity” to work with Priti Patel, home secretary, who over the weekend promised a crackdown on clothing factories in Leicester.
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