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The chair of a cross-party group of MPs has written to the heads of the UK’s 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 over the integrity of Shein’s supply chain after hearing “contentious evidence” from the company this week as part of a broader inquiry into employment rights in the workplace.
Byrne wrote to Nikhil Rathi, chief executive of the Financial Conduct Authority, and Dame Julia Hoggett, head of the London Stock Exchange, to say the committee “struggled to receive transparent answers from Shein on their business practices”.
He asked both organisations 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 linked to accusations of the use of forced labour, as well as on plans to pursue a listing in London this year.
Shein, which was founded in China and is based in Singapore, uses thousands of manufacturers in China to make its garments and subsequently sells them at ultra-low prices globally.
It has boomed since the Covid-19 pandemic but also faced allegations of poor working practices in its supply chain. The company has repeatedly said it has a “zero-tolerance policy” regarding forced labour and much 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 reply to the committee.”
Rathi told the Financial Times last month that the FCA’s decision on whether to authorise a company to list in London would depend solely on its disclosures, not “every aspect of their corporate behaviour”.
Without specifically commenting 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, the investors understand it and they can price that risk”.
Before a company can list in the UK, the FCA checks that its prospectus contains all the elements it should do, but does not verify the accuracy of this information.
Any inaccuracies or omissions subsequently discovered can lead to investor lawsuits and FCA enforcement action.
Rathi is accompanying UK chancellor Rachel Reeves on a three-day trip to China this weekend and could discuss the Shein 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 “profoundly concerned at the lack of candid and open answers to some extremely simple, basic questions” from Shein about its supply chain in his letter to Hoggett.
He asked whether the LSEG was able to verify “statements by firms seeking to list, with particular regard to their safeguards against the use of forced labour in their products”.
Writing to Rathi, he wanted to know what checks were in place to ensure companies disclosed legal risks to prospective investors in their listing documents.
LSEG and Shein did not immediately respond to a request for comment.
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