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Boohoo to launch independent review of supply chain

<span>Photograph: Elizabeth Leyden/Alamy</span>
Photograph: Elizabeth Leyden/Alamy

The online fashion retailer Boohoo is launching an independent review of its UK supply chain after allegations that some factories in Leicester that sell clothes to Boohoo paid workers below the minimum wage and failed to protect them from the coronavirus outbreak.

Boohoo’s share price took another hammering on Wednesday, closing down 14% at 224p, despite the announcement of the review, meaning almost £2bn has been wiped off the value of the company this week.

One analyst said the further share price fall was a reflection that “serious questions” remained about the retailer’s supply chain, despite the review. Retailers including Next and Asos have removed all Boohoo clothing from sale.

Investigations into the broader garment manufacturing industry in Leicester are continuing. The National Crime Agency said it had attended a number of business premises in the Leicester area to assess concerns raised in relation to modern slavery in recent days. It said the visits werelikely to continue, in line with action set out by the Gangmasters and Labour Abuse Authority (GLAA).

The agencies have joined with Leicestershire police, Leicester city council, the Health and Safety Executive, Leicestershire fire and rescue, and Immigration Enforcement to carry out inspections of garment factories in the city over the past week.

Related: Next, Asos and Amazon drop Boohoo amid Leicester factory claims

Boohoo, which owns brands including PrettyLittleThing and Nasty Gal, said the review would be led by Alison Levitt QC, the former head of law firm Mishcon de Reya’s white collar crime unit, and said it would initially invest £10m towards “eradicating malpractice” in its supply chain.

As part of the plan, it is understood the company is considering setting up its own factory in Leicester to demonstrate best practice.

The company said in a statement its board was “shocked and appalled by the recent allegations” and was committed to working to rebuild the reputation of textile manufacturing in Leicester.

Boohoo shares chart

The Boohoo group chief executive, John Lyttle, said the board was taking the matters seriously, adding: “We will not hesitate to terminate any relationships where noncompliance with our code of conduct is found.”

City analysts welcomed Boohoo’s move, with Wayne Brown at Liberum saying the company’s response “should start to help rebuild confidence that Boohoo intends to do the right things”.

He wrote in a note: “While serious questions will remain for some time, today is the first positive step forward in transparency.”

Boohoo will provide an update from its supply chain review in September, when it publishes its half-year results, and further updates are due in January 2021.

The group will also launch an independent third-party supply chain review, to be carried out by the ethical audit and compliance specialists Verisio and Bureau Veritas.

Boohoo said it had begun to investigate allegations of worker mistreatment as soon as it was made aware of them.

It said the company named in this weekend’s Sunday Times report was not and had never been a supplier. It said that to date it had not found any evidence of suppliers paying workers £3.50 an hour, or less than the current legal minimum wage of £8.72 for those aged 25 and over.

However, Boohoo said it had found evidence that two suppliers had failed to comply with its code of conduct and Boohoo has terminated its relationships with both of those firms.