Boohoo has called for the UK Government to implement a licensing system to ensure that textile factories are safe for trade amid reports of abuse by suppliers to the online fashion community. The home secretary, John Lyttle, Boohoo’s chief executive, said in a letter to Priti Patel that a “joint effort between industry and government” was needed to revamp the UK fashion industry and “provide an opportunity for retailers and brands to invest.”

Patel is reportedly considering new laws on modern slavery due to fears that the existing law is “not suitable for the purpose.” Boohoo said that a licensing scheme would raise tax and “create a barrier preventing rogue businesses from entering the market and undermining legitimate manufacturing companies, creating a level playing field for companies to compete fairly.”He said the scheme should cover workers’ protection from forced labor, debt bondage, and mistreatment, ensuring payment of national minimum wage, VAT, PAYE, national insurance, holiday pay, health, and security.

After weeks of pressure on Boohoo, the letter arrives amid reports of corruption in its supply chain. Analysts speculated that the company could move at least 40 percent of its UK output abroad if increased regulation leads to factory closures and increasing costs. Retail analysts at investment bank Credit Suisse, Szilvia Bor, and Simon Irwin estimate that as much as 7 percent of Boohoo ‘s production is undertaken by unmonitored subcontractors in the UK – factories that help the company’s main suppliers but are not scrutinized by Boohoo’s.

The analysts said Boohoo’s supply chain transparency and its ability to trace where its goods were made were limited compared with industry benchmarks such as H&M or Inditex owner Zara. Unmonitored factories, many of which are based in Leicester, are at the heart of Boohoo ‘s supply chain’s allegations of wrongdoing. In the UK, the company makes over 40 percent of its goods, most of which originate from Leicester. One can do the company check here.

Boohoo has conducted an independent review of its supply chain amid reports of malpractice and a dive in its share price. The probe’s terms are scheduled to be published by the end of July, and next year a full report is due. The company said it would spend £10 m at Leicester to boost conditions. “We remain strongly committed to UK manufacturing and to upholding the highest ethical, conformity, and accountability requirements for the good of all garment workers,” Boohoo said.

The Credit Suisse analysts say that regulators’ scrutiny of the Leicester garment industry in terms of minimum wage, fire safety, and human rights concerns was likely to lead to closures of factories and restrict Boohoo ‘s ability to source in the UK. Boohoo has also been criticized by the head of the House of Commons Environmental Audit Committee for failing to take appropriate action since its 2019 report, for which Boohoo co-founder Carol Kane provided testimony, exposed working conditions at Leicester factories.

“The outcome is very unclear, but if the report from the [audit committee] is right, there are major abuses and certain factories will be shut down or forced to pay minimum wages, social insurance, holiday pay, etc. to their workers. Capacity may well be lost, and the intense price pressure may seem very likely to ease, leading to higher prices even from legally compliant manufacturers, “the analysts at Credit Suisse said.

Any overseas shift would have major implications for the business model of Boohoo, which is based on testing styles with shoppers and using nearby manufacturers to quickly restore bestsellers. Credit Suisse estimates that at present as much as a quarter of Boohoo clothes made in Asia are air-freighted, but points out that increasing this activity could be costly and also “run into obstacles to compliance with ethics and sustainability.”