Primark has created a fund to cover wages of factory workers in countries such as Bangladesh and Sri Lanka where the value fashion giant has cancelled orders as coronavirus led to the closure of stores.

The value fashion giant, owned by ABF, said it has already paid £1.6bn for stock in its shops, distribution centres and in transit, under its standard terms despite losing sales expected to total £650m a month following lockdowns ordered by governments worldwide designed to combat the spread of the infection.

Primark said it has offered extended payment terms to suppliers to cover “further stock ready for shipment” but, because of the impact on factory workers producing orders that will not now be taken, it “will fund payment of the wages that relate to this product, taking into account adjustments for government support packages provided in each country”.

The initiative applies to workers in Bangladesh, Cambodia, India, Myanmar, Pakistan, Sri Lanka and Vietnam.

Primark said it would discuss appropriate “mechanisms” with external bodies to ensure the cash goes to the intended recipients.

The retailer said it has been working with the International Labour Organisation “to collaborate with governments, international financial institutions, development banks and others in a position to make available medium and longer-term financing to pay the wages and benefits of workers along with economic support to the garment industry”.

Primark chief executive Paul Marchant said: “Every one of our stores around the world is closed. With a backlog of stock in stores, depots and in transit, we have had to make the very difficult decision to cancel orders for future stock.

“Finding a way to ensure that workers in our supply chain in these countries are paid has been a priority and we are pleased that this fund will provide relief to these workers”.