Yahoo Finance Boohoo faces £100m modern slavery class action
Sovereign wealth funds and local councils are among a group of investors plotting a £100m lawsuit against Boohoo after allegations of modern slavery wiped more than £1bn from the company’s value.
The fast fashion retailer is being targeted by City lawyers seeking compensation for shareholders who suffered losses after allegations of forced labour in Boohoo’s factories came to light in 2020.
Claims surrounding Boohoo’s factories, first reported by The Sunday Times, were later verified in an independent review by barrister Alison Levitt KC.
She found that “allegations about poor working conditions and low rates of pay in many Leicester factories are not merely well-founded but substantially true”.
In her report, she said: “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.”
The findings have sparked a brewing class action against Boohoo, which could reach the High Court if a settlement is not reached. No claim has yet been filed against Boohoo.
However, Boohoo has instructed lawyers at Herbert Smith Freehills to fend off the potential litigation, which involves around 100 institutional investors.
A spokesman 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.”
Shares in Boohoo plunged after it addressed the modern slavery revelations in July 2020, ultimately wiping £1.1bn off the value of the business.
This fall in value is the basis for investors’ bid to claim compensation.
Ms Levitt concluded in September 2020 that Boohoo did not feel “any real sense of responsibility for the factory workers in Leicester” because they were “largely invisible” to the business.
She said: “It is hard to empathise with the plight of those of whom they know little.”
John Lyttle, managing director of Boohoo, said at the time that the review had identified “many failings” and branded the problems “unacceptable”.
Boohoo’s share price has fallen by 85pc over the past five years. The company was at one point worth more than £4bn but is now worth £385m.
Frasers Group founder Mike Ashley has been building a stake in Boohoo for months and is now the largest single shareholder with a 16.5pc stake.
