Image source, Getty Images
- Author, Oliver Smith
- Role, Business reporter, BBC News
Chinese fast fashion firm Shein has filed initial paperwork taking it a step closer to listing on the London Stock Exchange, the BBC understands.
The online retail giant, which is based in Singapore but has extensive operations in China, filed the confidential papers with UK regulators recently, according to sources close to the process.
Shein became one of the biggest fashion retailers in the world during the pandemic, but has faced criticism over the environmental impact of its business model.
The firm has also come under fire for some of its working practices, which include allegations of forced labour in its supply chain – something the company denies.
Both Shein and the UK regulator, the Financial Conduct Authority (FCA), declined to comment on a potential London listing, which could value the company at about £50bn.
US warning to UK
A company wishing to sell its shares in the UK must first apply to the FCA for a prospectus containing detailed financial information to be approved.
The filing of papers is the first stage of that process and brings the company a step closer to a listing in the UK – selling shares in the business on the London Stock Exchange – but doesn’t necessarily mean it will end up listing there.
In fact, it was initially thought that a listing in the US was the most likely route for Shein after the firm filed papers there late last year, but the move came under close scrutiny from both Republican and Democrat politicians amid concerns about the company’s close links to China.
Earlier in June, Marco Rubio, a leading Republican on the US Senate Intelligence Committee, and an ally of Donald Trump, wrote to UK Chancellor Jeremy Hunt warning him about “grave ethics concerns” and Shein’s “deep ties to the People’s Republic of China”.
“Slave labor, sweat shops, and trade tricks are the dirty secrets behind SHEIN’s success,” Mr Rubio wrote in his letter to Mr Hunt.
“The United Kingdom has a storied tradition of abolitionism, from Wilberforce and Cowper to the Modern Slavery Act in our day. I trust you will treat these allegations against SHEIN with the utmost seriousness, investigate them fully, and take appropriate action to protect investors,” he added.
Image source, Getty Images
UK MPs have also expressed concern, but Labour’s shadow business secretary Jonathan Reynolds indicated on Monday that he would welcome Shein listing its shares in London, as it would open the company up to closer scrutiny.
In a business election debate, hosted by Bloomberg, Mr Reynolds said he had met representatives from the company.
“My view on any business of this sort is that if they’re doing business in the UK, we should ideally seek to regulate them from the UK.
“The kind of expectations we would have, whether that is on labour market or regulatory compliance, or tax – that is best done from them being based in the UK.
“So if a listing was to be considered, I would want that, because I would know that is the way we can enforce the high standards we would expect,” he added.
His opponent in the debate, the Conservative Business Secretary Kemi Badenoch, said she had concerns over a potential listing but added: “It doesn’t mean we don’t want them.”
Admitting that she was yet to meet anyone from the company, Ms Badenoch said one concern was around Shein’s business model of sending smaller packages direct to customers in the UK. Under customs rules, duties are not paid on goods under £135 and she said that could mean “quite a lot lost in terms of taxes” for the government.
Ms Badenoch also said she would “want to look at” allegations around forced labor.
“The City is regulated and we have regulators that do that. I’m talking specifically about this business and what we’d want to see.
“We don’t want a situation where the business secretary is interfering in every single listing… but those are my specific problems with Shein,” Ms Badenoch said.
Some parts of the fashion sector in the UK have also urged caution. The British Fashion Council (BFC), which represents companies such as Burberry and Mulberry, said a stock exchange listing for Shein would be “of significant concern to UK fashion designers and retailers”.
“Fashion businesses, including Shein, must embrace corporate due diligence in their supply chains. The BFC would encourage the UK government, the Financial Conduct Authority and the London Stock Exchange to ensure that any business listing in London is an active, responsible leader in this regard and is able to evidence addressing compliance and sustainability concerns in all areas, from worker treatment to material sourcing to citizen engagement in disposable fashion,” said Caroline Rush, the chief executive of the BFC.
Despite the criticism, a potential Shein listing would be seen by many as a big boost for London, which has seen a number of high-profile companies leave the city for the US.
In an interview with the BBC last month, the head of the London Stock Exchange, Julia Hoggett, said the move would ensure the company became more transparent.
“Any company that wishes to put itself through the scrutiny of being on public markets – that is the opportunity for them to raise the bar in the way that they approach their corporate governance and the way they approach investors, and I think that is very much the value that public markets have,” she said.