Boohoo slumps as supply chain scandal intensifies

Boohoo shares slumped on Friday following a report the fast-fashion retailer has been selling clothes made by at least 18 factories in Leicester, which according to audits have failed to prove they pay workers the minimum wage.

According to an investigation into the Leicester garment industry carried out by the Guardian, third-party audit reports produced in the last four years make claims of "critical" issues over record-keeping and working hours at the time they were written, suggesting that in parts of the supply chain workers were being paid as little as £3 to £4 an hour.

The Guardian said the reports, which Boohoo did not have access to, provided a snapshot of alleged issues at the factories at the time the audits were undertaken.

Since Boohoo became embroiled in allegations over pay and working conditions in its supply chain, it has insisted that the issues reported in the press in July were evidence of "the actions of a few".

Asked by the Guardian about the findings of the reports, eight of the firms denied the claims in whole or in part. In some cases, they said the reports reflected circumstances at a particular moment that have since changed.

Meanwhile, another 10 did not respond to multiple requests for comment.

At 1610 BST, Boohoo shares were down 10.8% at 284.80p.

The owner of PrettyLittleThing, Nasty Gal and Coast said in a statement that its own investigations had highlighted "similar issues" at some of the manufacturers identified by the Guardian and that it had suspended trading with them due to non-compliance.

A Boohoo spokesperson said: "On the 8th July, we announced an independent review of our UK supply chain in Leicester. This two-part approach saw us invest heavily in significant extra compliance and auditing resource to forensically investigate the allegations that had been made about mistreatment of people employed by garment manufacturers in the area.

"We also appointed senior Barrister, Alison Levitt Q.C., to lead a comprehensive and fully independent review of our Leicester supply chain, which has included a public call for evidence. The documentation that has been seen by The Guardian appears to be a selection of commentary from a limited number of the third party audits that have been completed. Whilst we are deeply concerned by these findings, until these processes are concluded, we have had sight of all the facts and received Ms Levitt’s findings, it would be inappropriate for us to comment further.

"The group is committed to delivering the highest standards of ethics, compliance and transparency, and we have committed to sharing an update on the findings of Ms Levitt’s review, our response, and the actions that we will take to address any failings at the end of September.

"We will continue to offer our full support to raise standards where appropriate for the benefit of those employed in our supply chain, but will not hesitate to take more severe action when necessary. We can confirm that due to the nature of the non-compliance that we have found in a small number of manufacturers during this process we have immediately suspended trading with them whilst they take the appropriate action to resolve the issues identified within the timeline we have set. This includes some of the manufacturers identified by the Guardian, as our own investigations have highlighted similar issues.

"We feel that it is important to give owners the opportunity to show demonstrable, measurable and significant improvement to protect the jobs of those employed, but if we are left in any doubt about an owner’s true commitment to drive change in the time frame that we have set out we will have no choice but to terminate trading with them.

"We recognise that walking away from every factory where an issue is found would have a catastrophic impact on the livelihoods of those employed in the sector. Instead, we are working closely with a number of organisations, including the GLAA and Slave Free Alliance, sharing our findings with them to support the important work that they do in ensuring that the rights of workers are protected and that everyone is treated fairly and paid appropriately."