Boohoo bosses knew of 'serious' supply chain issues months before scandal
Boohoo chiefs knew workers were being mistreated in the fast fashion firm's Leicester supply chain months before a “sweatshop” scandal exploded in the media, an independent review has found.
Bosses were aware of serious issues at least by December 19, according to investigator Alison Levitt QC, who uncovered a damning litany of problems including life-threatening fire safety breaches and evidence that staff were earning less than the minimum wage.
Ms Levitt found no evidence Boohoo had committed any crimes, but said the company failed to take action fast enough and warned that its supply chain is likely riddled with bad behaviour.
She said: “It is more likely than not that these conditions exist across the best part, if not the entirety, of Boohoo’s Leicester supply chain. The problems we have described are endemic.
“I have concluded that, in truth, Boohoo has not felt any real sense of responsibility for the factory workers in Leicester and the reason is a very human one: it is because they are largely invisible to them. It is hard for people to empathise with the plight of those of whom they know little.”
The internet retailer was plunged into turmoil in July when an undercover Sunday Times reporter visited a factory where staff were allegedly paid less than minimum wage.
Boohoo shares plunged almost half in the wake of the scandal and the firm's board vowed to take action.
Ms Levitt's review found that senior Boohoo directors were aware of some issues months earlier.
An auditor emailed Boohoo's sustainability head Tom Kershaw in December after visiting a site in Leicester to say: “The factory has the worst working conditions that I have seen in the UK and is not safe for the workers. We have pictures and I will send to you.
“I honestly feel that Boohoo should stop trading with the factory with immediate effect as it is such high risk. I do not usually make such suggestions but the risk is so high to the Boohoo brand and is a major news story waiting to happen.”
Ms Levitt said: "From (at the very latest) December 2019, senior Boohoo directors knew for a fact that there were very serious issues about the treatment of factory workers in Leicester.
"Whilst it put in place a programme intended to remedy this, it did not move quickly enough."
The QC added that her own investigations had found that some buildings in Leicester had no open fire escapes. She said: “Were a fire to break out... it is likely that there would be loss of life."
Many staff were not entitled to paid holiday or sick pay, she said, were working brutally long hours and were paid less than the minimum wage.
On Friday, chief executive John Lyttle said that the review had identified “many failings” and branded the problems “unacceptable”.
However, the company said: “We are confident that we can successfully embed all of the independent review’s recommendations into our business model, without impacting lead times or financial expectations.”
Its confidence in implementing the measures pushed up the company’s stock. Some investors had expected a worse outcome for the company. Shares soared as much as 17pc in early trading, and closed over 15pc higher.
The review has recommended a raft of improvements to Boohoo’s corporate governance, compliance and monitoring processes. The company is hiring two new non-executive directors and an experienced independent figure to oversee improvements.
Ms Levitt's report did find that the firm was already trying to tackle the toxic treatment of workers when it came under scrutiny.
But analysts at Peel Hunt said: "There is an acknowledgement that the allegations into Leicester supply chain shortfalls are well founded and substantially true."
The company said the investigation found that Boohoo could have been a force for good if it had taken a different approach to how it interacts with the Leicester supply chain.
Ms Levitt said: "It has already made a significant start on putting things right.”
Mr Lyttle, who took over last year, said: "This is a journey and it hasn't just started... With the benefit of hindsight, 'could we have been quicker on some of these actions?' , 'yes'.
"We're very much committed to supporting Leicester workers and their workers' right, and make sure that we can address any hardships that have been felt."
Boohoo makes about 40pc of its clothes in the UK, which gives it an advantage over other rivals as it can respond to fashion trends and sell new clothes much quicker.
The firm said that it will be able to make all necessary changes without impacting how long it takes to make clothes.
Mr Lyttle said that prices for its dresses and T-shirts will not go up going forward.
Deputy chairman Brian Small, who was Boohoo’s representative for the review, said it made "uncomfortable reading" in parts. He said: "We welcome in particular her clear recommendations, which we accept, and as a board are committed to driving up standards in our supply chain and business practices."
Peel Hunt analysts added that the review meant Boohoo is likely to cut the number of suppliers it deals with, giving more work to remaining partners and allowing it to carry out more rigorous inspections.
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