Boohoo faces £100m lawsuit over ‘modern slavery’ scandal at Leicester workshops that exposed how staff worked for as little as £4 an hour in poor conditions and wiped more than £1bn from its value

• A case is being planned on behalf of investors who lost out when shares fell 

Boohoo is facing a £100million lawsuit after an investigation exposed allegations of modern slavery in Leicester workshops which wiped more than £1 billion off its value.

The lawsuit, brought by sovereign wealth funds, local councils and other investors, follows the revelations in 2020 that staff were working in awful conditions and being paid just £4 per hour.

City lawyers are now demanding compensation for shareholders in Boohoo, who suffered financial losses after the scale of the scandal became known.

The allegations were first reported in the Sunday Times but were later verified in an independent review headed by Alison Levitt KC.

Although no official case has yet been filed, Boohoo has instructed lawyers at Herbert Smith Freehills to try and halt the pending litigation, the Telegraph reports.

Alison Levitt QC was hired by Boohoo to review its business practises after concerns over poor conditions and low pay Pictured: Faiza fashion factory in Leicester which used to supply clothes to Boohoo

Bosses at Boohoo had known about the issues over low pay and poor working conditions at Leicester clothes factories, a report found (Pictured: Mahmud Kamani, co-founder of Boohoo)

The fight for compensation involves around 100 investors, who have seen Boohoo’s share price fall by 85 percent in the past five years.

The company used to be worth in the region of £4 billion but this has now shrunk to just £385 million.

After the allegations came to light, the Levitt report concluded in September 2020 that although there was no evidence of crimes being committed, bosses were aware for months of poor working conditions and low rates of pay.

She found: ‘Boohoo’s monitoring of its Leicester supply chain was inadequate and this was attributable to weak corporate governance.

‘Senior Boohoo directors knew for a fact that there were very serious issues about the treatment of factory workers in Leicester and whilst it put in place a programme intended to remedy this, it did not move quickly enough.’

She added that individual workers in the Boohoo supply chain were ‘largely invisible’ to managers.

Issues at Boohoo had been raised as early as 2017 by Channel 4, with the BBC and the Guardian reporting on specific problems in the chain’s Leicester factories. 

Boohoo CEO John Lyttle said Levitt’s review identified unacceptable issues in Boohoo’s supply chain

Alison Levitt QC (pictured) was hired by Boohoo to review its business practices following the scandal

Ms Levitt said that Boohoo ‘capitalised on the commercial opportunities offered by lockdown and believed that it was supporting Leicester factories by not cancelling orders, but took no responsibility for the consequences for those who made the clothes they sold’.

READ MORE: Boohoo bosses knew about ‘very serious issues’ over low pay and poor working conditions at Leicester clothing factories MONTHS before scandal was exposed, report reveals

However, the she also placed a part of the blame away from Boohoo.

She said: ‘Inaction by the authorities has contributed significantly to the deficiencies… If the law is not enforced, this sends a clear message that the violations are not important and the people affected do not matter.’

Responding to the report, Boohoo chief executive John Lyttle said: ‘Ms Levitt’s Independent Review … has identified significant and clearly unacceptable issues in our supply chain, and the steps we had taken to address them, but it is clear that we need to go further and faster to improve our governance, oversight and compliance.

‘As a result, the Group is implementing necessary enhancements to its supplier audit and compliance procedures, and the board’s oversight of these matters will increase significantly.

‘As a board, we recognise that we need to rebuild confidence that these matters will be dealt with appropriately and sensitively, and that they will not recur.’

A spokesperson for Boohoo said: ‘A formal claim relating to this matter has not been made. If any proceedings are issued in relation to this matter, they will be robustly defended.’ 

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