Ethics and standards in Leicester’s fashion retail supply factories have once again come under the spotlight following allegations of slave labour and blatant disregard for social distancing requirements in the Covid-stricken city.

  • Ethical Trading Initiative says “many responsible brands have walked away from operating in Leicester at all”
  • One retailer warns “people aren’t getting paid, minimum wage benefits fraud and dangerous working conditions are commonplace”
  • Another says Boohoo co-founder Mahmud Kamani “maybe is the one person who could sort this out”

This time, online fast fashion star Boohoo is at the eye of the storm after claims that workers supplying its goods were paid below the minimum wage and forced to come to work even when ill with coronavirus.

Boohoo label

Boohoo has cut ties with two suppliers for non-compliance with its code of conduct

Boohoo has unveiled a range of measures in response. The etailer says it has not found evidence of suppliers paying workers £3.50 per hour but it has found evidence of non-compliance with its code of conduct and axed two suppliers.

As its investigations continue, and whether ultimately Boohoo is shown to have failed in its own duty or not, the controversy is just the latest to engulf retailers that work with suppliers in Leicester, where efforts to stamp out bad practice have consistently failed.

The situation in Leicester has been described as an “open secret”. It has persisted for years and been highlighted by campaigners, the media and retailers themselves.

Two years ago, for instance, former New Look chief executive Anders Kristiansen told the Financial Times: “When I came to the UK and I discovered what was going on in Leicester, it was mind-blowing. How can society accept it – not even society, how can the government accept it?”

Leicester’s dark underside was also flagged by Parliament’s Environmental Audit Committee (EAC) last summer when it published its report Fixing fashion: clothing consumption and sustainability.

The EAC said Leicester has the “second-highest concentration of textile manufacturers in the country, with 700 factories employing 10,000 textile workers”. Its factories have proved attractive to the new generation of online fast-fashion specialists because they enable rapid turnaround and reorder of popular lines.

But Leicester’s clothing supply industry is riddled with bad practice and illegality. The EAC cited a Leicester University study commissioned by the Ethical Trading Initiative (ETI), which found “the majority of the city’s garment workers were paid below the National Minimum Wage, do not have employment contracts and are subject to intense and arbitrary work practices”.

It continued: “Workers’ rights issues included excessive working hours, night shift subcontracting and poor health and safety conditions in the workplace.”

Leicester was also “identified as a hotspot for human trafficking”.

Setting aside any failings by retailers, some fashion factories in Leicester suffer from unscrupulous owners happy to exploit their staff.

Dangerous conditions

The ETI, more typically concerned about conditions overseas than in the UK, has attempted to improve the situation in Leicester. But it came up against an unwillingness to change among some manufacturers, and retailers have increasingly chosen to take their business elsewhere.

ETI executive director Peter McAllister tells Retail Week: “We just weren’t able to get traction with suppliers that were happy to find gaps in the law and employ people in buildings which were unsafe, being paid below minimum wage. 

“What we’ve heard [this week] is similar to what we saw in our research and, as a result, many of the responsible brands have walked away from operating in Leicester at all. 

“Our leverage normally comes because we have members that are respected and take this seriously – without them in the region, we don’t have leverage.”

“Rogue factories can make money without working with respectable brands and they make more money by not having to comply with those standards”

Peter McAllister, Ethical Trading Initiative

He gives the example of one retailer who “did all the right things and was told ‘We can do this without the transparency you’re asking for, and if you don’t like it then leave’”.

“[Rogue factories] can make money without working with respectable brands and they make more money by not having to comply with those standards.”

One retailer that does business with Leicester suppliers, but has reduced the amount, paints a similar picture. 

He tells Retail Week: “People aren’t getting paid minimum wage, benefits fraud and dangerous working conditions are commonplace.” That means that good suppliers, like retailers who deal responsibly with manufacturers in Leicester, “are tarnished with the same assumptions”. 

Sewing machine

Responsible manufacturers and retailers in Leicester are tarnished by proximity to bad actors

Whatever the shortcomings of some suppliers in Leicester, retailers cannot get away from their responsibility as part of the chain. Furthermore, as concerns about the social and environmental impact of fast fashion rise, retailers are expected by customers, investors and peers to do the right thing. That was evident as Boohoo’s share price went into a tailspin after the revelations, losing more than £1bn of value, and big partners such as Asos, Next and Zalando suspended sales of Boohoo brands.

The same retailer that sources in Leicester says bad practice by any single retailer, such as willingness to turn a blind eye to factory conditions – or even the perception of such willingness – has a knock-on effect. 

It becomes harder to justify doing business with Leicester at all, including with suppliers that uphold all the necessary standards. It also forces sourcing costs up in comparison with those borne by any retailer willing to work with rogue suppliers.

Boohoo’s response

  • The etailer has launched “an immediate independent review of our UK supply chain” that will be spearheaded by Alison Levitt QC. The review will cover supplier compliance with minimum wage regulations; compliance with Covid-19 regulations; working hours and record-keeping; right-to-work documentation and contracts of employment. Terms of reference will be published in July and there will be regular updates beginning at September’s interim results
  • Committed to investing an incremental £10m “to eradicate supply chain malpractice”
  • Accelerating a third-party supply chain audit programme with specialist partners Verisio and Bureau Veritas
  • Bolstering governance with the appointment of two more non-executive directors

Retailers’ responsibility

So what should be done?

Boohoo has launched a raft of initiatives in response to the allegations and discovery that suppliers had broken its code of conduct.

One retailer makes two observations about Boohoo. Retailers need to ensure that staff know they can raise ethical issues without fear. Boohoo co-founder, majority shareholder and executive chair Mahmud Kamani is a strong-willed, forceful character, he observes. Might employees lack the confidence to raise concerns with him and instead focus on meeting their targets, meaning brewing problems could go unnoticed? 

“Mahmud Kamani maybe is the one person of all people who could sort this out – they respect him and might listen to him”

A source familiar with Boohoo acknowledges that Kamani “wears his heart on his sleeve” but maintains that anybody should feel able to approach either chief executive John Lyttle or director of sustainability Tom Kershaw with concerns. 

Boohoo also said this week it would recruit two more non-executive directors “to provide an appropriate balance of independent directors on the group’s board”, and that “consideration will be given to experience in dealing with environmental, social and governance matters as part of the recruitment process”.

The same person who raised Kamani’s forceful nature also believed it could bring benefits in the current circumstances. Kamani, a former rag trader, is looked up to by many suppliers because of his background and the soaraway success he has achieved with Boohoo.

“Mahmud maybe is the one person of all people who could sort this out – they respect him and might listen to him.” However, Retail Week understands that, while he will take a close interest in the situation’s progress, Kamani will leave Lyttle and Kershaw to take the lead.

Mahmud Kamani

Mahmud Kamani is looked up to by many suppliers because of his success with Boohoo

While individual retailers could and should take action as necessary, more will be needed. Dame Sara Thornton, the UK’s anti-slavery commissioner, told Radio 4’s Today programme this week: “The retailers have a responsibility. They need to go beyond superficial modern slavery statements, beyond audit, and really work with suppliers.”

But she also said a multi-agency approach was required involving everyone from the National Crime Agency to the Health and Safety Executive. 

One retailer that has taken a keen interest in the problem of modern slavery says the ultimate responsibility lies with the government. In 2015, then home secretary Theresa May helped pass the Modern Slavery Act, which they say was “groundbreaking” but has never really been enforced.

The British Retail Consortium (BRC) wants the government to “urgently implement” statutory licensing of textile businesses and factory owners, similar to the Gangmasters and Labour Abuse Authority licensing scheme that applies to food production.

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The BRC says: “Licensing would first and foremost protect workers, but it will also create a barrier to entry preventing rogue businesses from accessing the market and undercutting legitimate fashion manufacturing companies, therein creating a level and competitive playing field for businesses to compete fairly. 

“It will also raise tax revenues and provide assurance to retailers to source from the UK and support the development of an ethical, creative, world-leading industry.”

The EAC made several recommendations in its report last year, such as strengthening the Modern Slavery Act “to require large companies to perform due diligence checks across their supply chains” and updating the Companies Act 2006 “to include explicit reference to ‘modern slavery’ and ‘supply chains’”.

The problems revealed in Leicester may not be isolated. The retailer concerned with slavery issues says: “Any UK food retailer, or any retail business really, that claims to not have any human slavery in their supply chain is being foolish.” They may even be there in plain sight.

As Boohoo has found out to its cost, it is an issue that no retailer can afford not to be on top of.