Dark factories: labour exploitation in Britain’s garment industry | Free to read
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When Hassan Doshi moved from India to Leicester in 1982, he had good reason to feel optimistic. He had landed in a place that was hungry for sewing skills, a city of factories whose motto was “Leicester clothes the world”. He arrived on a Friday and started work on Monday. “1982 was good timing! I miss that time,” says Doshi, who is now 60 and still makes his own trousers. He remembers 29 days of paid holiday, 12.30 finishes on Fridays, and factory owners poaching him with the promise of higher pay.
These good times ended in 2001. The factory where he had worked for a decade — a supplier to the retailer BHS — closed down because, he says, production moved to Sri Lanka. It had done well to hold out so long. Retailers had already started “chasing the cheap needle round the planet”, as one retail executive puts it, and they have continued to do so.
The garment trade in Leicester, a city in the heart of England that boomed in the industrial age, managed to cling on, fragmented and weakened, in small units in the shells of old factory buildings. Market traders and wholesalers kept sourcing clothes there, as did some high-street brands like New Look when they needed to top up stocks. Doshi spent years bouncing from struggling small factory to factory, “always moving, moving, moving”.
Now, new economic forces have started to blow on the embers of Leicester’s clothing industry. Since the financial crisis, dozens of upstart British online retailers have prospered by catering to what Boohoo, one of the biggest of these brands, calls the “aspirational thrift” of young millennials. This is the Instagram generation that wants to buy today what their favourite celebrity wore yesterday. Fulfilling these desires quickly means sourcing close to home.
“Speed is our main USP and the UK is as quick as you can get,” said Nitin Passi, founder of online retailer Missguided, in 2014. Both Boohoo and Missguided source at least half their clothes in the UK, with hubs in Leicester, Manchester and London supplying a host of brands. I bought two Boohoo dresses for £6 and £7 respectively; both turned out to have been made in Leicester. Trendy, fast and cheap has proved a winning strategy. Boohoo’s market value has more than doubled to about £2.3bn since listing on London’s Aim exchange in 2014.
How is it possible to make cheap clothes in a country where the minimum wage for over-25s is £7.83 an hour? Online retailers’ nimbleness and lower overheads allow them to pay more for products while still giving consumers a good price. In addition, there are manufacturers that use technology to make clothes more efficiently. But factory owners in Leicester say some take a different route, one more reminiscent of the 19th century than the 21st. They call these places “dark factories.”
Part of Leicester’s garment industry has become detached from UK employment law, “a country within a country”, as one factory owner puts it, where “£5 an hour is considered the top wage”, even though that is illegal. Doshi (not his real name) says he has worked in places with blocked fire escapes, old machines and no holiday or sick pay. There are garment factories that follow the law, but a “perceived culture of impunity”, as a 2018 government report puts it, has created a bizarre microeconomy where larger factories using machines are outcompeted by smaller rivals using underpaid humans.
And while some retailers blame unethical factory owners, the factories say retail’s relentless push for cheap prices makes it impossible to improve. As a result, what should be a good news story for people like Doshi has become a cautionary tale about how the reshoring of manufacturing jobs can go wrong when the government fails to enforce its own laws.
Perhaps the strangest thing about this labour exploitation is that it is an open secret. Central government knows; local government knows; retailers know. “When I came to the UK and I discovered what was going on in Leicester, it was mind-blowing,” says Anders Kristiansen, who was chief executive of high-street retailer New Look from 2013 until September last year. “This is happening in front of your eyes and nobody’s doing anything?!” he remembers thinking. “How can society accept it — not even society, how can government accept it? It’s so sad, I’ve not spoken about it for a long time because it frustrated me so much.”
Saeed Khilji, the chairman of the Textile Manufacturer Association of Leicestershire, drives around the garment district pointing out old industrial complexes. This part of Leicester is crammed with factories, red-brick terraces, mosques and churches. “This Temple building — one building — there’s 100 factories in there,” he says. “Each with 10 people, 15 people, 20 people.”
Khilji is a sharp dresser, with a groomed black beard. He set up TMAL last year because he felt the local industry needed a collective voice. As we drive, he keeps stopping to shout greetings to people. Then he points out a row of doors on St Saviours Road. “You only see one door but there are three or four factories behind each one.”
Having been inside some, “factory” does not feel like the right word. In its heyday, Leicester garment manufacturer Corah employed more than 6,000 people. Now the average UK garment factory employs fewer than 10, according to University of Leicester research.
In the ones I was allowed into, there were workers at sewing machines listening to the radio, big ironing boards, and tables where people folded and packed clothes. One was doing a run for PrettyLittleThing, an online “fast fashion” brand owned by Boohoo. Another was making trousers for an over-40s catalogue.
Khilji parks outside the Imperial Typewriter Building, where Leicester’s famous typewriters were once made. Now the 1930s building is old and dirty. A broken window is patched up with a cardboard box. It too is home to garment factories. Khilji and I only get as far as the stairwell, where a spaghetti of wires dangles from the ceiling. One person who has visited said he was “frightened to be in the building. There’s just so many small units, there’s fabric stacked high.” He worried about potential fire risk. Khilji says many factories are now moving out because they see it as unsafe. “The condition of that building is very bad, but it’s not representative.”
How did the industry get here? When big manufacturers started to leave, some workers spent their redundancy money on buying the machines left behind. They set up small units, but clothing prices kept falling and working conditions worsened as they tried to stay competitive. As successive UK governments pushed up the legal minimum wage, parts of this bit of Leicester seem to have simply moved into a twilight world. It is not the only place where this has happened: New York and Los Angeles have grappled with poor conditions in garment factories as has Prato in Italy.
Today, people in Leicester earning £5 an hour “walk out of factories with their heads held high”, says Mick Cheema, who runs a garment factory called Basic Premier that pays legal wages. He says the average wage in dark factories, as he calls them, is about £4.25 an hour. Factories often under-record hours, so people’s payslips look as if they have been paid the minimum wage. “Say you’re working 40 hours for £4 [an hour], but legally you should get almost £8 — so these people are showing 20 hours at £8 an hour,” explains Khilji.
Doshi has experienced both the good and the bad when it comes to pay. Once he worked for three weeks without wages, then the factory suddenly shut down, giving him just £100. About 18 months ago, he was working in a factory in Cobden House, a six-storey building with razor wire on its wall, earning the minimum wage. Then the company went bankrupt. “I’m crying now [it’s] closed down.”
He went upstairs where a “fast fashion” factory had vacancies. They said his wage would be £4 an hour. When I went to look for it, it appeared to no longer exist. One manufacturer in Cobden House told me factories don’t always last long. Someone opened in the unit next to him “working all sorts of hours” for online retailers, he says, but then disappeared three months later.
As ever with illegality, pinning down its scale is tough. A study by the University of Leicester in 2015, commissioned by the Ethical Trading Initiative, an alliance of major retailers and unions, concluded the majority of the city’s garment workers were paid less than the minimum wage. When politician Harriet Harman led a group here last year from the joint committee on human rights, she estimated it was between a third and three-quarters. Khilji disagrees. “I should say 99 per cent,” he says. “I’m saying openly, these are the problems and we need to address them.” The root cause, he argues, is the way retailers treat suppliers.
Enforcement agencies uncover illegal migrant workers in occasional raids, but life goes on. Cheema remembers people fleeing from a factory on the other side of the street as it was raided. Nearby, he says, was another dark factory. “The boss of that factory was looking out of his door and down the street and letting two people out at a time,” he says. When raids happen, word spreads quickly and the streets fill with people as factories empty out.
Workers do not necessarily have better options, Khilji explains. Many are either from Doshi’s generation and have never learnt good English, or are more recent arrivals from eastern Europe or India. “They don’t have any skill, so manufacturers are actually taking them and training them and giving them something.” Lately, people have been coming from Daman in India on Portuguese passports because the place used to be a colony. “Some of the people is struggling, you know — so, £3? £4? OK,” says Doshi. He knows of a three-bedroom house with three or four families living in it.
Some factory owners say that workers believe they are better off with lower pay and fewer hours on the books, because they will receive more help from the state in tax credits and housing benefit. If that is what workers think — and I did not hear it from any directly — they are mistaken.
Calculations by the Resolution Foundation show that in every scenario it is better to be paid the minimum wage for 40 hours than for 20. But it is certainly true that taxpayers are losing money because workers are illegally underpaid, both because the government has to pay more benefits, and because HMRC loses about £1,000 in tax from the employer per worker.
Trade unions lack a strong presence here. Community organisations do their best but funding has been squeezed. The local Highfields Centre lost all its council funding in 2015. Its chief executive, Priya Thamotheram, who says he took a 65 per cent pay cut at that time, is keen to run an advice service for workers and provide more education programmes, but he cannot do it without money. “It’s got to be about building up their confidence and opening their horizons to other things,” he says. “If you walk the streets in the early mornings in the St Saviours area, you’ll see people . . . who are youngish, well into their sixties, and everything in between . . . It’s sad to see some of them . . . going into these factories, dingy little places, some of them.”
Retailers audit their suppliers in Leicester and say they do not work with any that break the law. But unauthorised subcontracting is a problem and factories can present books that look clean because they under-record hours.
Dispatches, a Channel 4 programme, sent a worker undercover into various factories in 2010 and again in 2017. Both times they were paid well below the minimum wage. In the most recent one, they were making clothes for New Look, River Island, Boohoo and Missguided. All retailers said their orders had been subcontracted to those factories without their permission or knowledge.
Last year, Kristiansen, while still chief executive of New Look, and Asos’s chief executive Nick Beighton, wrote to parliament’s human rights committee to say they wanted to source more in the UK, and Leicester could be the “driving force” behind the industry’s resurgence, but that “serious underlying concerns . . . could fatally derail any such success story”. They called for better law enforcement.
Manufacturers, meanwhile, are sick of retailers saying everything is their fault. When Khilji called a meeting last year, he says about 300 people turned up, many of them factory owners. They complained retailers offered such low prices per garment that they simply “cannot be manufactured ethically”, according to meeting minutes. “They’re asking cheap, cheap, cheap,” Khilji says. “Where last year they paid £8, now they’re asking £7 for same garment . . . So I don’t think they have any right to shout about ethics.”
Santoshan Sangha, who has spent 30 years working in and running factories in Leicester, says: “I can put the retailers to shame — ‘You know full well this is not a price you’re able to buy for, so how are you looking to buy?’” Many retailers employ ethical trade teams, then a separate team of “buyers” who negotiate orders and prices. Sangha said the former understand the manufacturers’ concerns, “but the buyers just say, ‘We’re under pressure.’” Several suppliers said young buyers often had no idea how to cost material and labour. When asked why they wouldn’t just refuse an order, they said they had to keep their factories busy to cover their costs. If they said no, the person next door would say yes.
Helen Russell, a former senior buyer for high-street retailers who became a lecturer in fashion at De Montfort University, has seen inexperienced buyers “that see it as a little bit of a game to play suppliers off against each other at a very late stage” because of “margin” pressures from managers. She said best practice was to treat suppliers with respect and keep their samples confidential.
Suppliers also say the retailers give them no commitments, forcing them to live from order to order. Because speed is so important, they risk penalties if they deliver late, which can incentivise them to subcontract. Khilji reserves his strongest criticism for the high-street retailers that source in Leicester but who, he says, have “no connection” with factories. Online brands like Boohoo grew out of family-owned wholesaler businesses so they understand the supply base better, he says, and would, for example, help a struggling factory with a loan.
But others say the online brands are particularly aggressive on price. Boohoo holds weekly meetings at its Manchester head office, where suppliers bring samples to the product teams in a single room with 10 to 12 large tables. “It’s like a cattle market,” says one person from a supplier who did not want to be named. “Say I’m the buyer, and [you’ve] just given me the price of this [dress] for £5. I will literally hold it up to the next table and say, ‘How much for that?’ and he’ll tell you £4. It’s ruthless.”
Boohoo said suppliers appreciated having “regular, open contact” and offered private discussions in separate rooms if they preferred. “Buying a garment is a negotiation and Boohoo would never force a supplier into selling something against their wishes,” merchandising director Paul Horsfield said in a statement.
Earlier this year, Jenny Holloway, owner of London factory Fashion Enter, went to Leicester at the request of the council to give a workshop to other owners. Fashion Enter has an ongoing order commitment from Asos and uses technology to monitor tasks and ensure decent wages.
After hearing from the manufacturers, she fired off a letter to Peter McAllister, executive director of the ETI. “Have you been to review the cost prices given to these factories by certain retailers and etailers? Any person in the industry would know that these cost prices are totally unobtainable,” she wrote. “The onshoring of production back to the UK is happening here and now but it’s fragile. The mighty retailers have clout and financial resources and factories don’t . . . [Retailers should] work with carefully selected manufacturers and support them.”
To be fair to the ETI, this is the approach it has been advocating in Leicester. “We want to see UK manufacturing thrive, but it mustn’t be based on a 19th-century model of exploitation and poor working conditions, where profit comes at the expense of workers,” McAllister said in a statement. “Clothing brands hold a lot of power over their suppliers and need to recognise that unreasonable demands are likely to drive poor working conditions for the women and men who actually make the clothes. At the same time, suppliers mustn’t use brand-buying practices as an excuse for exploiting their workers and breaking the law. Both are wrong.”
ETI-member brands such as New Look, River Island and Asos created a forensic auditing system for UK suppliers called Fast Forward several years ago, and have cut the number of Leicester factories they use from about 130 to just 30. New Look alone reduced its UK suppliers by 80 per cent “due to concerns regarding working practices”, a spokesman said. He said working “ethically and sustainably” was “fundamental” to its business, and that it used suppliers’ feedback to “support them whilst ensuring alignment with our ethical requirements”.
Asos currently only uses 16 factories in the UK, seven of which are in Leicester, and says it gives them regular orders. Sourcing director Simon Platts says the sector needs investment in infrastructure and training, as well as enforcement and legislation, all of which require a joint effort. Missguided has recently joined the ETI too and Khilji says it has cut its Leicester-based suppliers. (It declined requests for comment.) The ETI has arranged for a consultant and specialist from Acas, the workplace relations advice service, to help factories set up ways to give workers a voice.
Khilji says that as these brands have partially retreated, more Leicester factory owners are reliant on Boohoo and the host of wholesalers and other brands that do not use Fast Forward. Boohoo confirmed it was not a member of the ETI but said its ethical trade policy was “based on the ETI base code, which sets out worldwide standards of labour practice”. Boohoo’s Paul Horsfield said it used the Sedex Members Ethical Trade Audit to govern relations with suppliers, and that Boohoo also had a sourcing and compliance team based in Leicester which pays “regular unannounced visits” and helps suppliers “work towards best-in-class working conditions”.
But some manufacturers who chose the high road say that, far from being rewarded with more business, they are struggling to survive. Mick Cheema and his wife Rajinder thought they were on to a winner when they opened Basic Premier in 2012 with the idea of appealing to retailers as a compliant factory. The Cheemas knew that to compete with factories paying below the minimum wage they would need to be more productive, so they planned a big operation and bought two £100,000 machines to cut fabric in the most efficient way. The factory is bright and clean, humming to the clatter of the sewing machinists.
To begin with, workers flocked to them. “My wife and I would get so excited,” says Cheema. After interviewing candidates, he would say, “‘Before you start, just bring over your P45 or a National Insurance number and your right-to-work documentation . . . ’ and you would never see them again.” Eventually they managed to recruit people — though not as many as hoped. The culture was a shock for some. “We need an efficient workforce to be competitive [so we were telling them] when you’re on your machine you can’t be talking on your mobile phone . . . You can’t eat your food on the machine . . . You have to clock in.” The new recruits weren’t used to any of this. “If you’re working in Tesco’s or for an engineering facility outside of this square mile, it’s the norm,” Cheema says. But in the Leicester microeconomy, it was odd, and not everyone stuck it out.
Then there was the problem of securing orders. The factory has successfully passed a slew of audits, including Fast Forward, but it is still seen as one of the most expensive factories in Leicester. “It’s so frustrating,” he says. “Because you’re not on a level playing field. No matter how hard we try to achieve efficiencies . . . you’re still going to be in a place where you’re commercially in no-man’s-land.”
I took Cheema four dresses with “made in the UK” labels — the two that cost £6 and £7 from Boohoo, one for £12.99 from TK Maxx and a New Look one for £15.99 — and asked him to cost them. He and a colleague spread them out on a table, rubbing their fingers over the seams, drawing an outline of each and filling out a costing sheet.
Retailers do not disclose their “buying-in margins”, which can vary based on business model, but Cheema says retailers typically charge customers three times what they paid to suppliers. A competitive price to make these dresses would thus be just £2 and £2.33 for the Boohoo dresses, £4.33 for the TK Maxx dress and £5.33 for the New Look.
Cheema and his colleague say that Basic Premier would have to charge Boohoo £6.45 to make the dress it is selling for £6, and £5.65 for the £7 one. They would charge £8.22 for the TK Maxx dress and £5.65 for the New Look one. They said the Boohoo and TK Maxx dresses were out of reach even if they made zero margin themselves.
I gave the costings to Boohoo, which said the dresses had been made by Leicester suppliers but did “not reflect the norm for our business” because they were from a core collection “where we take a view on the cost price and absorb margin loss in order to offer the products at the best price possible”. TK Maxx said it was “committed to operating our business with high standards of ethics” in its vendor code of conduct, which requires its “vendors” and subcontractors to follow all laws and regulations.
According to Cheema, retailers banging the drum about the importance of ethical production in Leicester have not followed through. “[We thought] we’ll pass the audits and we’ll get orders from all these retailers, [but] we reached that goal years ago and there’s no pot of gold at the end of the rainbow. ” Basic Premier does get orders — on one of my visits the workers were making tops for Sainsbury’s — but far fewer than it expected and with no ongoing commitment.
Meanwhile, Cheema says, many competitors carry on breaking the law. “It has got worse. Because nothing has happened, people have physically seen [they] can get away with it.” He and his wife have decided to cut the factory in half to reduce overheads. “It’s a bit scary. Us, the workforce . . . have got so much to lose.”
Santoshan Sangha says his factory committed to Fast Forward for three years, lost £100,000 and went out of business. He says the retailers gave him no commitment in return. “They said, ‘OK, we want to work with you,’ give you a couple of orders, then go back to Turkey or wherever, and six or eight months later they return when the pound’s in their favour and expect to find you’re still here.”
Other manufacturers have taken note. Fast Forward was “made by retailers, for retailers” with “nothing for manufacturers”, says Khilji. David Camp, its founder, responded that it was an “effective” way for manufacturers to “demonstrate they were compliant with the law.
Cheema thinks there is a two-pronged solution: first, retailers should put their money where their mouths are, committing to sourcing a percentage from the good factories. “What’s a couple of thousand garments a week from two or three retailers? These companies sell hundreds of thousands of garments a week.” Second, the government should enforce the law. “[Leicester’s] got its own rules, its own laws, its own ways of doing things,” he says. “We’ve lost faith in the government stepping in.” Workers seem to feel the same way. “The government knows what’s happening in Leicester,” says a friend of Doshi’s, who did not want to be named, “and that’s it. They don’t do anything.”
The enforcement agencies can hardly claim to be unaware of what is happening. Representatives from UK Visas and Immigration, the Health & Safety Executive (HSE) and the Gangmasters and Labour Abuse Authority all attended a meeting hosted by Leicester mayor Sir Peter Soulsby last October, where the problems were discussed in detail. But a comb through freedom-of-information requests, MPs questions and public records does not reveal a state that has done much to sort this out.
Over the five years to 2016-17, HM Revenue & Customs, which has recently had its enforcement budget doubled, has identified about £33m of arrears for almost 232,000 people who have been paid under minimum wage nationwide. Of that total, it found underpayment in just 19 employers in the textile sector, owing £44,371 to 83 workers. A government spokesperson said: “Short-changing workers is a red line for this government and employers who cross it will have to pay back every penny and could face fines of up to twice the wages owed.”
HSE, meanwhile, was told by the government in 2011 to cut the number of proactive workplace inspections it makes by one-third. In 2012, Chris Grayling, then employment minister, said: “If we try to legislate out all risk, we will lose jobs to other places.” For textiles manufacturing, the enforcement approach has been “principally reactive”. There were 187 inspections of garment and textile factories last year, an increase on 103 inspections five years ago. But there were 136 workplace injuries reported in the sector last year — reportable injuries are those that necessitate more than a week off work or involve damage such as amputations, the crushing of internal organs or burns covering more than 10 per cent of the body. HSE investigated just five.
A spokesperson said the criteria for when HSE would investigate a reported injury included “prima facie evidence of a serious breach of the law”, and that the agency still inspected businesses in “non-higher-risk” sectors if there was evidence of poor health-and-safety risk control.
As for Leicester council, it has held meetings and workshops but points out that central, not local, government has jurisdiction to enforce health and safety in factories and the minimum wage. However, it does have a responsibility to enforce building safety, and an FOI request shows the last time it inspected the Imperial Typewriter building was in 2004. The council says it has not received any complaints about the building since then. The Leicestershire fire and rescue service last inspected the building in February 2017 in response to “concern from fire service crew” and the outcome was deemed “satisfactory”.
Last year, the government appointed Sir David Metcalf to a newly created post: director of labour market enforcement. He published his first strategy last week, devoting a page to Leicester’s garment sector. “While some enforcement action has been undertaken in this sector and city over the last few years, this has clearly not had an effective impact on overall compliance,” the report said.
Metcalf recommended a pilot to test whether “joint working” between enforcement agencies, the council, industry bodies and suppliers “can help change the perceived culture of impunity”. He said this should involve “highly visible targeting of non-compliant garment businesses in Leicester”. Phil Coyne, the council’s director of city development and neighbourhoods, said the problems “relating to ethical practice within the industry are an issue nationally, not just in Leicester”. But he added the council wanted Leicester workers to be “properly paid, well trained, and work in safe environments”, and was “very pleased” with the recommendation.
Metcalf tells me the UK government enforces labour law too lightly overall: “The amazing thing is how many firms comply, because you haven’t got enough enforcement resources and the fines are too low.” He says the average employer can expect an HMRC inspection once every 500 years, based on current statistics. He has recommended higher fines and new “joint responsibility” rules, where companies would be named if they failed to sort out non-compliance in their supply base.
The next step could be to impose “joint liability”. For the British economy, already held back by poor productivity, it makes no sense to allow the good to be undercut by the bad, he adds. “It’s those good firms being more productive which will boost our productivity, not the ones that are very labour-intensive and working fiddles on tax credits.”
This is a moment of opportunity for Leicester. If retailers were able to truly collaborate with manufacturers, they could create decent jobs for a community that needs them while enjoying the benefits of sourcing close to home. But, if anything, they are splitting apart. Some factories are looking for other solutions entirely. Khilji has launched a website, mesheme.com, to help manufacturers sell direct to consumers. This way, he says, they will be able to make reasonable profits and pay their workers properly. Cheema is also planning to sell to smaller operations or direct to consumers.
Retailers are on different paths too. McAllister said the ETI would continue to work with brands and suppliers to tackle Leicester’s problems, but added: “Unfortunately, many of the companies, especially some etailers, who source in larger volumes from Leicester, are not ETI member companies and have failed to engage with this process.”
Boohoo declined to be interviewed but Horsfield’s statement said the company was “delighted” to be supporting the “creation of employment opportunities in the UK”. He said Boohoo recognised its “duty of care to all its stakeholders” and was “putting increasing effort and resource into leading the way in sustainable change for the industry”. Boohoo’s full-year results showed revenues almost doubled to more than £500m with pre-tax profit up 40 per cent to £43m. Co-founder Mahmud Kamani and his family have joined the ranks of UK billionaires, according to last week’s Sunday Times Rich List.
In Leicester, life carries on. Doshi can’t sew any more, as his eyes are bad with cataracts and his back hurts. He applied for jobs at Tesco and Asda but they said his English was too poor. He has been going to college at night to study English but he failed his exam and was told there was no more government money to take it again. He went to see a sandwich factory but it was “all day stand up, it’s very fast, everything cold, cold”.
Finally, the week before we met, a friend told him about a new garment factory that could give him a packing job. He went to the interview and asked about pay. The boss told him they would see how fast he could work. Maximum? £4.50 an hour. And if he was slow? £3.50.
Sarah O’Connor is an FT investigations correspondent
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