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Boohoo hires top lawyer to investigate supply chain

Boohoo model
Boohoo model

Boohoo has drafted in independent specialists and launched a sweeping investigation of its supply chain in the wake of sweatshop allegations.

Following a three-day probe, Boohoo has said that garments for its brand Nasty Gal were made in Morocco and not Leicester, but were shipped there for repackaging.

It added that it had found no evidence of suppliers paying workers £3.50 an hour, as reported in the Sunday Times. 

However, Boohoo said it found “other evidence of non-compliance” for two suppliers that did not adhere to its standards and had severed ties with them.

Despite the measures, the company's shares continued to drop, falling another 12pc on Wednesday to 230p. The stock has lost 40pc of its value since Friday leaving Boohoo worth £2.9bn - £200m less than arch rival Asos.

Boohoo has said it was “shocked and appalled” by the claims. It clarified that Jaswal Fashions, where the undercover investigation took place, had never been a supplier and it did not occupy the site, despite the factory displaying the sign.

The independent investigation into its supply chain will be led by Alison Levitt QC, the former head of the business crime group at law firm Mishcon de Reya, and Brian Small, the company's deputy chairman.

Separately, it is also working with two ethical and compliance firms, Verisio and Bureau Veritas, to scrutinise its third party suppliers, whereby they are hired by some of Boohoo’s main suppliers. It also vowed to inject £10m to “eradicate supply chain malpractice”.

Markets Hub - Boohoo Group PLC
Markets Hub - Boohoo Group PLC

The business, which also owns Pretty Little Thing and MissPap, makes 40pc of its dresses, T-shirts and loungewear in Britain. This allows Boohoo to react quickly to fashion trends and sell new products faster than some rivals.

Chief executive John Lyttle, who joined from Primark, said: “We wish to reiterate how seriously we are taking these matters and we will not hesitate to terminate any relationships where non-compliance with our code of conduct is found.”

Analysts at Jefferies welcomed the move, saying it was “a clear move back onto the front foot in addressing concerns about the UK supply base”.

Broker Peel Hunt said that the share price fall was a buying opportunity and that investors had to accept that Boohoo's ethical and social credentials were still a “work in progress”.

Michael Harris, a director of financial crime compliance at data firm LexisNexis Risk Solutions, said a thorough supply chain check can take as little as two weeks for a foreign supplier, and even faster with a UK-based entity.

“Following that initial due diligence, regular check-ins on the existing supply chain can take far less time and resource – in other words, there is simply no excuse for a lack of due diligence to be taken in organisation’s supply chains and particularly for organisations with significant resources such as high street brands that we all too frequently see being implicated in cases of labour exploitation,” he said.

An investigation led by the National Crime Agency and local authorities in Leicester did not find any wrongdoing under the Modern Slavery Act 2015.

Boohoo’s top brass is in line for a £150m bonus payout if the company’s share price continues to rise by 2024.