Boohoo knew of Leicester factory failings, says report | Business

An independent report has found that Boohoo knew of “endemic” problems in its Leicester suppliers including minimum wage and life-threatening fire risks but did “too little too late” to fix them.

The damning review, conducted by Alison Levitt QC on behalf of the fast fashion retailer, found that allegations of poor working practices in the company’s supply chain – initially denied – were “substantially true”. It said that Boohoo’s monitoring of the factories was “inadequate” because of “weak corporate governance” and called the failure to assess the risk to workers during the coronavirus pandemic “inexcusable”.

Boohoo accepted the review’s recommendations for change in full and apologised for failing to “match up to the high expectations we set for ourselves”. Group CEO John Lyttle said the company would be “a leader for positive change in the city”, adding: “It is clear that we need to go further and faster to improve our governance, oversight and compliance.”

The brand pledged a series of reforms including a move to publish a full list of companies in its supply chain, reducing the number of factories it relies on, and using new ethical suppliers. Investors reacted positively to Boohoo’s promises of reforms, with the company’s share price rising 16% on Friday.

Levitt’s review – commissioned after investigations by the Guardian and Sunday Times found evidence that factories in Leicester were putting workers’ health at risk during lockdown and failing to pay them the minimum wage – said that the company had failed to provide all of the evidence asked for. It also found that:

• Founder Mahmud Kamani in 2018 told staff to “trade faster harder and quicker” to push prices in Leicester down, and had for “too long” been “allowed to dictate company policy”, Levitt said.

• 93% of suppliers analysed had at least one instance of non-compliance with the company’s audits in recent years on issues including minimum wage and unauthorised subcontracting. Factories were found to have locked fire doors, filthy toilets, buildings in “deplorable” condition, and “no wholesome drinking water”.

• Boohoo executives had exhibited an “occasional lack of frankness”, including joint CEO John Lyttle who failed to mention a trip to “appalling” factories which he “could not possibly have forgotten”.

• Internal emails warning of social distancing breaches in factories were sent when the pandemic began in March, with one saying: “This is escalating … my instinct is this could blow up in our faces”.

The report concluded that the situation in Leicester was not allowed to worsen deliberately but was instead the result of “weak corporate governance”. Levitt said that Boohoo had “made a significant start on putting things right” and noted that there was no evidence that the company had committed any criminal offences.

But she added: “To the best of our knowledge and belief, Boohoo has not reported any possible criminal offences uncovered by its audits. There may be perfectly proper reasons for this but they have not been explained to us.”

Levitt was also sharply critical of the authorities in Leicester and said: “If the law is not enforced, this sends a clear message that … the people affected do not matter.”

Leicester Labour MPs Liz Kendall, Jon Ashworth and Claudia Webbe issued a statement describing the findings as “unacceptable” and accused the government of “slashing the budgets of the very enforcement bodies that are supposed to keep workers safe”. They called on Lyttle to resign.

Andrew Bridgen, the Conservative MP for North West Leicestershire who has campaigned on the issue, said he had found Boohoo’s previous denials of issues in Leicester “laughable” and accused the company of “gaining huge commercial advantage” from turning a blind eye to conditions in the city.

Labour Behind The Label’s Dominique Muller, author of the report that first drew attention to issues in Leicester factories during lockdown, said that the company’s plans for reform were “lacking in detail and ambition”.

The 234-page report set out a wide range of findings – and concluded that the company had major concerns over practices in Leicester well before the pandemic.

While Boohoo responded to claims of minimum wage violations in Leicester earlier this summer by saying it was “shocked and appalled”, Levitt concluded that senior directors “knew for a fact that there were very serious issues” over the treatment of workers there since late 2019 at the latest.

Levitt said that “somewhat to our surprise” Lyttle had missed three opportunities to reveal issues arising from a visit to factories in December last year including one that an auditor described as “the worst that I have seen in the UK” and warned was “a major news story waiting to happen”.

The QC wrote: “It was my view that, given that John Lyttle could not possibly have forgotten this, his failure to tell me about it was significant.” She added that his silence may have been the result of a misunderstanding.

Levitt’s review also details founder Mahmud Kamani’s attitude to problems in the city. In an interview, which the QC said was a “colourful experience”, Kamani said: “The way we treat our people is our responsibility, but if there is … maybe 20-30,000 machinists [in Leicester], is that my responsibility? If they eat too many chapatis and become obese, is that my responsibility? I don’t know where this goes.”

She said it would be crucial for Boohoo to begin by recognising the humanity of factory workers. Noting that staff she met at Boohoo HQ seemed astonished by the notion that machinists who make the clothes could be invited to the suppliers’ “fabulous parties”, she concluded: “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.”