How Shein will be a major flashpoint for Reeves and Starmer ...Middle East

It would be one of the UK’s biggest stock market flotations in years – but one so controversial that it’s worrying a growing number of MPs from both main parties.

The Chinese fast-fashion brand Shein has spent more than a year working on a plan to list its shares on the London Stock Exchange, and successive British governments have tried to help. If it goes ahead, it could help rejuvenate the City’s financial clout. And the lucrative fees from the flotation will swell the bank accounts of investment bankers, stockbrokers and lawyers.

Yet this business deal could have huge ramifications that stretch far beyond the Square Mile.

That’s not just because of the many accusations that have dogged Shein for years – including forced labour in its supply chain, environmental recklessness, and tax-loophole exploitation at the expense of traditional retailers.

It’s about growing alarm in some quarters over Rachel Reeves’s courting of China – and the massive geopolitical risks of the Treasury trying to woo Beijing despite knowing it could anger Washington.

Why the City and the Government want the deal 

When reports first emerged a year ago that Shein was considering listing in London, the firm had been valued in the US at up to $90bn (£70bn). A market capitalisation of that size today would see it rivalling BP as the ninth biggest firm on the London Stock Exchange.

Its value has reportedly dropped since then to about £25bn. But that would still be on a par with the UK’s biggest retailer, Tesco – remarkable for an online-only retailer selling dresses and T-shirts for as little as £1.99.

Susannah Streeter, head of money and markets at the investment platform Hargreaves Lansdown, says the flotation would be a “blockbuster” event for the City.

Shein has perfected a model of identifying trends more quickly than competitors, offering thousands of new designs every day, dispatching products to individual customers directly from China in packages small enough to avoid import taxes, and sending them quickly by air freight instead of slow container ships. Its arch rival, Temu, works the same way.

Founded by the mysterious billionaire Chris Xu in 2008, Shein’s UK sales hit £1.5bn in 2023, with a pre-tax profit of £24m. That was just a small chunk of its trade, however, with success in the US meaning that its global revenues hit $45bn that year, with profits of $2bn.

There’s no doubt the City could do with a boost from a firm with numbers like that.

Twenty years ago, nearly one in every five companies going public around the world did so in London, but that fell to about one in 100 by 2023, according to The Economist. In 2007 there were around 3,250 firms listed in the UK, but the number today has almost halved, down to circa 1,800.

Nineteen companies launched in London last year, but vastly more left – 88 in all – and now the mining giant Glencore is considering doing the same. In Bloomberg’s global ranking of locations for Initial Public Offerings (IPOs), Britain has declined to 20th – below Oman and Malaysia.

Encouraging more companies to list in London provides “knock-on benefits for the economy as a whole,” says Streeter.

Jeremy Hunt did his best to reel in Shein in his final months as chancellor last year, and his successor has continued those efforts. Having proclaimed that economic growth is the “number one mission” of her government, Reeves wants to demonstrate to China that the UK is open for its business.

Shein and claims of forced labour

Shein isn’t just any company, however – and China isn’t just any trading partner.

An undercover investigation by Channel 4 in 2022 found that labourers making Shein’s clothes in contractors’ factories were often working up to 18 hours a day, and being paid as little as 3p per item, with no weekends and only one day off per month.

The revelations led some influencers to refuse any further work with Shein, and the Rolling Stones cancelled a licensing deal with the brand after The i Paper alerted them to the scandal.

The company vowed to invest millions to improve standards after confirming that some suppliers were abusing workers. But last year another investigation by the Swiss campaign group PublicEye concluded that “illegal working hours” were still common for many workers in Guangzhou. Shein said it takes “firm action” if suppliers break local laws.

Just last week it admitted that audits had uncovered two cases of child labour in supplier factories. Shein terminated contracts with the firms involved immediately, saying it would “work tirelessly to ensure that these isolated cases are removed from our supply chain entirely in future”.

The UK’s Independent Anti-Slavery Commissioner, Eleanor Lyons, warned last year: “Encouraging a company like Shein to float on the UK market inadvertently implies endorsement of poor labour.” Human-rights campaigners fear that we could all become complicit if UK pension funds buy shares in the company.

Chinese cotton controversy

MPs and US Congress members are concerned that Shein may use cotton grown in China’s Xinjiang region – where Muslim minorities such as Uyghurs are alleged to have been forcibly coerced into manual labour to pick the crop – following investigations by the BBC and Bloomberg, among others.

In January, a senior Shein lawyer repeatedly refused to tell the Commons Business Committee whether its products contain cotton from Xinjiang. She also failed to answer questions about the flotation, leaving committee chairman Liam Byrne “pretty horrified by the lack of evidence” presented to MPs by the firm.

The firm has since confirmed it does not track how many of its products sold in the UK use Chinese cotton, because unlike in the US, British regulations do not demand this.

Meanwhile, British retailers complain that Shein gains an unfair advantage from rules exempting packages worth less than £135 from import tax. Theo Paphitis, the Ryman owner famous for his appearances on Dragon’s Den, is among those calling for the tax loophole to be closed.

Shein argues that it keeps prices low because its “on-demand business model and flexible supply chain” reduces inefficiency, “and this has driven our success around the world, not the exemptions that retailers receive under current tax regimes.”

Although the US has banned the importation of goods suspected to have been made using forced labour, the UK does not. Rosie Monaghan, a senior researcher at the Business & Human Rights Resource Centre, says the UK should legislate “to avoid becoming a ‘dumping ground’ for products and practices tainted by labour-rights abuses.”

Shein said in a statement that it “has a zero-tolerance policy towards forced labour and we are committed to respecting human rights. We take visibility across our entire supply chain seriously and we require our contract manufacturers to only source cotton from approved regions.”

Concerns in Parliament

Shein has been laying the ground carefully in London. It has employed Global Counsel, the lobbying firm owned by Lord Mandelson – now the British ambassador to the US – to approach ministers on its behalf. Another lobbyist – Kamella Hudson of FGS Global – accompanied Shein head Donald Tang to meetings with Labour ministers last year, just months after she assisted Reeves during last summer’s election campaign, according to Bloomberg.

However, revelations about this private courtship have increased the sense of alarm among Labour backbenchers. They’ve joined the likes of former Tory leader Iain Duncan Smith and former Security Minister Tom Tugendhat warning against the flotation with the latter previously calling the retailer “a sinister cross between surveillance and capitalism” .

Rachael Maskell, who served as shadow Employment Secretary under Jeremy Corbyn, became concerned about Shein after one of her constituents – a painter who runs a small stationary firm in York – complained it had copied one of her designs, a copyright breach costing £100,000.

Shein says this case was caused by an external seller breaking the terms of its agreement while using Shein’s marketplace function. The firm “takes all claims of infringement seriously” and is improving its product review process. It is being sued in the US for allegedly using AI and data-scraping techniques to steal artworks for use on its clothes, but intends to “vigorously defend” itself.

Asked about the Chancellor’s apparent support for a London listing, Maskell says ministers “should think again, because it will undermine businesses on all sorts of fronts.” She said it would be a step towards the UK becoming a “bargain-basement economy,” which Starmer himself warned against in 2017.

Blair McDougall, the Labour MP who chairs the all-party parliamentary groups on both Hong Kong and Uyghurs, agrees. “Nobody can have any confidence that this is a company whose products are free from slave labour,” he says. “The City of London cannot be a soft touch for unethical companies.”

Phil Brickell, who entered Parliament last summer, accepts the UK is “in dire need of investment”. But he warns that Shein and other fast-fashion companies “should be held to very high standards on modern slavery in their supply chains,” because the industry “too often fails”.

He adds: “I urge the Government to consider carefully any move which might weaken the UK’s leverage on the world stage to advocate on behalf of repressed communities.”

Risks of angering America

In stark contrast to Britain, the US is trying to restrict Shein imports with Trump putting a 20 per cent tariff on all Chinese goods entering the US.

Shein only considered listing in London after abandoning its initial ambitions to float in New York – because a senior US senator, Marco Rubio, was pressuring regulators to reject its application.

Rubio is now Donald Trump’s Secretary of State, and his concerns about China go way beyond Shein. He warned in January that it is the “most potent and dangerous” nation the US has ever competed with, and will remain the “biggest threat” to American prosperity for decades to come.

Sam Goodman, a director at the China Strategic Risks Institute – a think tank which analyses risks posed by China’s rising authoritarianism – worries about the implications of the UK Government courting Shein, and Beijing more widely.

“If the UK is trying to position the London Stock Exchange as an alternative to New York, essentially saying to Chinese companies that don’t meet the requirements to list in the US, ‘Come to London and we’ll take your business,’ that creates a lot of geopolitical tension between us and our American partners.”

Stewart Paterson, the author of China, Trade and Power, agrees that allowing a flotation is not worth the risk of angering the US. “Why put a crosshair on yourself?” he says.

Reeves remains defiant

So far, none of this has deterred the Chancellor. She travelled to Beijing in January in an attempt to ensure that British firms have greater access to the Chinese market.

Questioned about Shein by MPs, Reeves underlined that “any company seeking to list in London has to meet stringent requirements, as set out by the United Nations and the OECD, on labour supply and the treatment of workers.”

A Treasury spokesperson said: “We do not comment on individual companies… We continue to focus on making the UK the best place for businesses to raise capital.”

It is the job of the City regulator, the Financial Conduct Authority, to scrutinise flotation applications. But its chief executive Nikhil Rathi has rebuffed complaints that companies like Shein shouldn’t be allowed to list in London because of ethical concerns, arguing his organisation can’t regulate “every aspect of their corporate behaviour” around the world.

The watchdog also loosened its rules on IPOs last year to encourage growth in the market, despite accepting this could increase risks for investors.

Will the flotation actually go ahead?

Shein hoped to go public in London by Easter, but that is expected to be postponed until the second half of the year after a troubling few months for the company.

Even before any impact from US tariffs, its global profits dropped 40 per cent last year to $1bn, according to the Financial Times. Competition from Temu was blamed.

Shein is said to have reduced its intended IPO valuation to $30bn (£24bn), although the company has never commented publicly on listing and sources in the firm say this figure is merely external speculation.

The company’s owners are also expected to sell only a small proportion of the company – perhaps even below the London Stock Exchange’s normal limit of 10 per cent, sources told Reuters in December. If it sold £3bn of stock, that would still be larger than any IPO in Europe last year, but it might not create the waves some have been hoping for.

Shein may also encounter problems in China. It has moved its headquarters abroad to Singapore, but it still needs Beijing’s approval to list in London. Goodman says that if the regime believes this flagship company is being “disloyal” to its country of origin, the authorities may withhold permission.

“Investors who have a keen eye on environmental, social and governance issues will be nervous and less inclined to invest in Shein,” says Streeter, calling the company a “laggard” on these issues compared to rivals.

Then again, “listing in London may force it to clean up its act,” she says. “There will be a spotlight trained on it, and Shein appears to have already taken some steps to ensure its supply chain is more transparent.”

It may take a lot more, however, to convince MPs and human-rights campaigners – plus, perhaps most crucially in this case, investors.

@robhastings.bsky.social

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