Leicester garment makers warn of crisis as fast-fashion brands squeeze suppliers

A woman in silhouette holds a smartphone displaying Boohoo clothes

In the east Midlands city – where manufacturers make clothes for a range of brands including Boohoo, Misguided and Frasers Group, the owner of Sports Direct and the online specialist Missguided – hundreds of garment businesses have shut in recent years, local organisations say, and suppliers warn that more are likely to follow.

The non-profit cooperative Labour Behind the Label estimated there were 1,000 factories in Leicester in 2020 and that this number had now halved.

Factories say their profits are being squeezed by punitive practices, last-minute cancellations and unexpected changes to orders as retailers attempt to rein in costs amid disappointing sales.

These practices are leading to waste, with hundreds of unwanted items being sold off in bulk for as little as 20p each in order to clear space in their workshops, say suppliers.

Labour Behind the Label claimed suppliers were often treated with “disdain and disrespect”. Suppliers have told the group about demands by Boohoo Group for discounts of between 10% and 20% on the agreed price for delivered and undelivered orders.

Usually when a brand places an order, a price is agreed and manufacturers are paid after the goods are delivered. When conditions in the market are tough, retailers attempt to protect their profits by demanding retrospective discounts from the suppliers.

A payment slip from May, issued by Boohoo to a Leicester supplier and shown to the Guardiansuggested the company imposed a 10% reduction on the price of an order.

The supplier, who asked to remain anonymous, said the order had taken several months to produce and had already been delivered when the reduction was imposed.

The supplier claimed it was not consulted or given an explanation for the cut, and that it would have to cover the reduction, so that “instead of making money” it was “losing it”.

“We will have problems now paying our fabric suppliers.” The supplier said its business, which has been operating for two decades in Leicester, may have to close and that production had been paused while it decided what to do next. “If they don’t come back with any solution, then many [others will] feel forced to leave the industry.”

Dominique Muller, the policy director at Labour Behind the Label, said she had spoken to suppliers who said they faced a 20% cut in May on items made for Boohoo.

In February, Frasers Group was reported by the trade title Drapers to have requested a 10% discount on outstanding payments and a 20% discount on ordered goods from suppliers for spring/summer 2023. Frasers Group has been approached for comment.

Boohoo, along with a number of other online fast-fashion brands, has been unable to sustain the surge in trading achieved during the pandemic when high street stores were closed. Its revenues fell 11% to £1.8bn in the year to 28 February, including a 9% fall in the UK.

Boohoo website on a mobile phone

Boohoo declined to comment on allegations that it had requested discounts. A spokesperson said the company wanted a “mutually beneficial relationship” with suppliers, that it had absorbed the impact of inflation last year and that it was now looking for prices to come down.

The spokesperson said: “Deflation is now occurring throughout our supply chain and we are on the front foot across our cost base. Capturing deflation in a timely manner will enable us to continue to deliver for customers by investing in reduced prices.”

They added that Boohoo had an “industry standard” supplier code of conduct that must be adhered to.

The latest pressure on garment makers comes after Boohoo cut ties in 2021 with hundreds of UK factories after a review uncovered “endemic” problems related to working conditions within its Leicester supply chain.

Manufacturers in the city had a further blow when Missguided, which was a leading buyer in the region, collapsed into administration last year. Missguided was later bought by Mike Ashley’s Frasers Group, but it is not clear how many UK factories it continues to work with.

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