MANCHESTER – Ultra-fast fashion brand Boohoo has lost around a quarter of its value on the stock market after UK Minister Priti Patel urged authorities to investigate the business over claims it was using a sweatshop in Leicester to produce cheap clothing during the coronavirus pandemic.
The Home Secretary has now asked the National Crime Agency to look into the issues amid claims that suppliers to Boohoo operated throughout the lockdown period without social distancing measures in place or the use of protective equipment.
Boohoo’s share price has fallen by as much as 25 per cent since the story broke.
Leicester has been forced into another lockdown as its cases of coronavirus have spiralled in June. Many local leaders blame the local garment industry, claiming that it was ‘business as usual’ for garment factories during lockdown and that this has helped to spread the virus while other parts of the UK have seen cases falling sharply.
Boohoo now faces a serious dilemma. Its business model is built around ultra-fast fashion, whereby it gets clothing from the catwalk onto its website even quicker than the likes of H&M by virtue of the close proximity of its suppliers in Leicester.
Authorities, brands and local stakeholders have tried in the past – and failed miserably – to get to grips with Leicester’s garment industry which is dogged by persistent issues of illegal sub-contracting, the use of illegal migrant labour, staff being paid below the minimum wage and all manner of other issues.
The question now is how much the Leicester scandal will impact Boohoo’s reputation among its customer base and whether they will lose sales as a result. If the company is forced to shift sourcing to other parts of the world – for many believe Leicester is beyond reform – this will have a major impact on its cost base and, ultimately, its business model and marketing strategy.
It might also impact Boohoo’s ‘Management Incentive Plan’ that will see founders Mahmud Kamani and Carol Kane each receive £50m stock payouts if the Boohoo share price hits 600p within three years.