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The chairman of a cross-party group of MPs has written to the heads of the UK financial watchdog and the London Stock Exchange to raise concerns about fast fashion group Shein ahead of its planned IPO.
Liam Byrne, who chairs the House of Commons business and trade select committee, said MPs had doubts about the integrity of Shein’s supply chain after hearing “controversial evidence” from the company this week as part of a wider inquiry into employment rights in the workplace.
Byrne wrote to Nikhil Rath, chief executive of the Financial Conduct Authority, and Dame Julia Hoggett, head of the London Stock Exchange, to say the committee was “trying to get transparent answers from Shein on their business practices”.
It asked both organizations for more details and checks on listing processes after a senior Shein employee refused to answer multiple questions about whether the cotton it uses in some of its products was from China’s Xinjiang region, an area related to allegations of the use of forced labor. , as well as plans to pursue a London listing this year.
Shein, which was founded in China and is based in Singapore, uses thousands of manufacturers in China to produce its clothes and then sells them at extremely low prices globally.
It has thrived since the Covid-19 pandemic, but has also faced allegations of poor labor practices in its supply chain. The company has repeatedly said it has a “zero tolerance policy” regarding forced labor and most of its cotton is understood to come from Australia and the US.
The FCA said in response to Byrne’s letter: “We look forward to setting out our role in our response to the committee.”
Rathi told the Financial Times last month that the FCA’s decision on whether to authorize a company to list in London would depend only on its disclosures, not on “any aspect of their corporate conduct”.
Without commenting specifically on Shein, Rathi said it was not unusual for UK-listed companies to carry legal risks around the world and “what’s important is that they disclose it, investors understand it and they can assess that risk.”
Before a company can list in the UK, the FCA checks that its prospectus contains all the elements it must, but does not verify the accuracy of this information.
Any inaccuracies or omissions subsequently discovered may lead to lawsuits by investors and FCA enforcement action.
Rathi is accompanying UK Chancellor Rachel Reeves on a three-day trip to China this weekend and may discuss Shein’s listing plans with his counterparts in Beijing.
David Schwimmer, chief executive of LSEG, which owns the London Stock Exchange, is also part of the delegation.
Byrne said he was “deeply concerned about the lack of honest and open answers to some extremely simple, basic questions” from Shein about his supply chain in his letter to Hoggett.
He asked if LSEG was able to verify “the statements of firms seeking to list, particularly regarding their safeguards against the use of forced labor in their products”.
Writing to Rath, he wanted to know what controls were in place to ensure companies disclosed legal risks to potential investors in their listing documents.
LSEG and Shein did not immediately respond to a request for comment.
