* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.
Millions of factory workers left jobless as a result of cancelled orders reflects growing problems within the fashion industry
By Charlotte Timson, Chief Executive of Traidcraft Exchange
As Covid restrictions are lifted, at least some UK high street retailers are bouncing back. Fashion sales shot up in March, with Primark reporting record sales in the first week of reopening.
In fact, despite their crocodile tears, many fashion retailers including Primark, Matalan, Sports Direct and Next had already reported profits in autumn 2020 covering the period of the first lockdown.
But this façade of returning normality mustn’t be allowed to mask the devastating long-term consequences of the actions of these same retailers last year. As soon as the first lockdown was announced, UK fashion retailers began to cancel orders – despite the clothes having already been made and in some cases even shipped. They demanded discounts from suppliers, and delayed payments by weeks or even months.
The ripple effect of these decisions on the people with least power and voice – the workers who make our clothes – will last a long time. As a result of these order cancellations, millions of garment workers across the world have been laid off. Many haven’t been paid for the work they had already done, and others didn’t receive their correct severance pay. This has forced many into destitution.
But what we saw last year was not a complete surprise. Retailers have abused their position of power relative to their suppliers for years. Nearly a decade and a half ago, Traidcraft Exchange identified some of these issues in ‘Material Concerns’, a guide to responsible purchasing in the garment sector.
However the extent and scale to which fashion retailers dumped risk and costs onto their suppliers during the pandemic was a surprise. Sadly, garment retailers from the UK were amongst the worst offenders. In June last year a Bangladeshi newspaper highlighted that UK retailers collectively owed one billion US dollars to their Bangladeshi suppliers. US retailers owed half a billion US dollars, with German, Swedish, Dutch, French and Spanish retailers each owing one hundred million dollars to their Bangladeshi suppliers. Primark, Mothercare, Debenhams were cited as the brands owing the most. These values give a sense of the scale of how much money was taken out of the Bangladesh economy at that time.
Under pressure from campaigners in the UK and worldwide, some retailers did commit to pay their suppliers eventually. But their actions highlighted how their business model allowed them to pass on risks and unexpected costs to their suppliers. Suppliers we have spoken to are too afraid to take retailers to court for fear of losing future orders.
The millions of workers made destitute as a result of cancelled orders adds to a growing body of evidence of something deeply wrong in the garment sector. The collapse of the Rana Plaza factory in Bangladesh eight years ago which killed more than 1100 people. The revelations of sweatshop conditions in garment factories in Leicester and India last summer. The use of forced labour among Uyghur Muslims in China. All of these are consequences of the flawed business models of fashion retail.
So how do we ensure that in future clothing retailers can’t wreak such havoc on their supply chains, including the millions of workers making our clothes?
There is a precedent for what could happen. The UK has a good track record of stopping abusive purchasing practices of major retailers in the food sector. In 2013, the UK introduced an independent watchdog for supermarkets – known as the Groceries Code Adjudicator. In 2014, 79% of food suppliers to UK supermarkets said they experienced abusive purchasing practices. As a result of the watchdog, by 2021, this had reduced to 29% of suppliers.
In 2016, the supermarkets’ watchdog was able to investigate Tesco’s relationship with its suppliers and require Tesco to revise its practices and pay suppliers the money owed, amounting to millions of pounds.
The UK Parliamentary Environmental Audit Committee recently recommended that the government set up a Garment Trading Adjudicator. This could be done along the model of the supermarket watchdog. Secretary of State for Business, Energy and Industrial Strategy, Kwasi Kwarteng, has confirmed that the government is looking into this. Rather than wait for the next tragedy to occur, we hope that the government will move swiftly to curb the disastrous practices of fashion retailers.