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Boohoo shares sink after Leicester factory revelations

Boohoo models
Boohoo models

Fast-fashion business Boohoo is under growing pressure to investigate its supply chain after bosses admitted the firm had no idea some of its clothes were made in a "sweatshop" factory in Leicester.

The company said it was not aware that it was using the facility, which is in the spotlight following allegations in the Sunday Times that it was paying staff illegally low wages and flouting safety measures.

The factory displayed the sign Jaswal Fashions - but Boohoo said this firm has ceased trading and the property is in fact now occupied by another, unidentified business.

Boohoo shares plunged 23pc, or 91p, to 297p in afternoon trade - wiping £1.1bn off the value of the business. There are now questions over how much the cut-price internet brand knows about its other suppliers.

Retail analysts at broker Peel Hunt said: “This story will run on, with potential for a wider investigation into Boohoo’s working practices. [This] may well put pressure on the shares in the short-term.”

The retailer insisted the factory in question is not a lead supplier and had been subcontracted without its knowledge.

Boohoo, which was criticised earlier this month after launching a £50m bonus plan for chief executive John Lyttle, has started an investigation to determine “how our garments were in their hands”.

It said: "Our early investigations have revealed that Jaswal Fashions is not a declared supplier and is also no longer trading as a garment manufacturer.

"It therefore appears that a different company is using Jaswal's former premises and we are currently trying to establish the identity of this company."

Staff at the plant claimed they were being exploited and paid £3.50 an hour - not even half of the minimum wage of £8.70p for people aged 25 or over in Britain.

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

The factory continued to stay open despite a local lockdown in Leicester, according to reports.

Boohoo, which sells T-shirts for as little as £3, called the working conditions “totally unacceptable” and said they “fall woefully short of any standards acceptable in any workplace”. It said it hoped the incident was “isolated”.

The firm also owns the Nasty Gal and PrettyLittleThing brands.

Peel Hunt said: “Critics would say that the group’s low pricing model, and fast turnaround of product in low volumes, encourages suppliers to flout these rules and structures by using noncompliant subcontractors to complete this work."

The likes of Boohoo and Primark have been hit with previous revelations of poor working conditions and are trying to raise their game as shoppers and investors become increasingly less tolerant of scandal.

Garment workers' rights group Labour Behind the Label last week claimed to have found evidence of Boohoo suppliers operating factories without social distancing measures in Leicester.