The City watchdog has been accused of a ‘race to the bottom’ after it reportedly gave Chinese fast fashion titan Shein the green light for a blockbuster London float despite child labour concerns.
The Financial Conduct Authority’s (FCA) approval brings the prospect of an initial public offering (IPO) closer, but it still needs clearance from Chinese regulators.
However, a top UK managers’ trade group, including Aviva Investors, Schroders and M&G, said the float could threaten the UK’s status as a premier listing destination.
James Alexander, chief executive of the UK Sustainable Investment and Finance Association, said investors have ‘raised concerns repeatedly about being exposed to Shein’ following allegations of forced and child labour in its supply chain.
‘A race to the bottom on governance and standards will not help us in the long term, as it risks undermining the status of the UK as a high quality financial centre,’ he added. The FCA would not comment on the report from news agency Reuters – a day after the watchdog’s boss Nikhil Rathi was reappointed by Rachel Reeves for another five years.
But market volatility has cast a shadow over Shein’s controversial plan.
A step forward: The Financial Conduct Authority’s approval brings the prospect of an initial public offering closer, but it still needs clearance from Chinese regulators
Russ Mould, investment director at AJ Bell, said the FCA’s approval was ‘undoubtedly significant’. The company had previously expected to make its debut in the first half of this year but this will now be a ‘big ask’, Mould said.
Turmoil on global stock exchanges may further delay approval in China.
The US has imposed blanket tariffs on the country – where Shein produces vast quantities of clothes – sending markets into wild swings. US President Donald Trump also closed a loophole that allows Shein and rival Temu to dodge import taxes on parcels worth less than $800.
Experts reckon these changes will force Shein to increase prices in the US, its largest market. But boss Donald Tang has attempted to quash concerns, saying the business is ‘about customers, not about customs policy’.
The online giant had been hoping for a mega £50billion flotation but has reportedly come under pressure to cut its valuation to around £23.8billion – at a time when the City is losing companies to rivals.
FCA approval comes after MPs had expressed concern with regulators about a lack of transparency from the firm amid allegations of abuse.
Based in Singapore, Shein was founded in China and relies on suppliers in the country to manufacture its cut-price T-shirts and dresses.
Human rights organisations have long accused China of abuses, saying Uyghurs – a mostly Muslim ethnic group – are forced to work in cotton production. Beijing has denied such claims and Shein insists it has ‘zero tolerance’ of forced labour.
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