Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

The dark side of fast fashion

Written by Li-Ann Chin, associate 
Edited by Tom Gillingham, associate partner
15 July 2021

Good morning,

Boohoo is — in many ways — a remarkable company. In the midst of a pandemic, the online fashion retailer grew by 41%, snapped up six fallen high-street retailers, opened two warehouses and unveiled a new London office.
 
Only yesterday, it also announced that it has teamed up with Kuwait-based Alshaya Group to build up the presence of one of those recently acquired retailers, Debenhams, in the Middle East.
 
The secret sauce to its success lies in its rapid reactions to consumer demand. On average, Boohoo churns out approximately 100 new products on its website a day, but if a particular design is found to be unpopular, it is immediately discarded.
 
Mid-last year, an undercover report on its Leicester garment factories revealed Boohoo to be embroiled in a modern slavery controversy branded as “one of the worst ESG scandals in UK history.” And while its share price fell close to 50% after the scandal erupted, the stock had effectively rebounded a mere month later and is now projected by analysts to continue rising despite ongoing concerns over its unresolved supply chain problems.  
 
Hailing from Nanjing, China, Shein is yet another example of a fast-growing fashion brand facing a labour abuse scandal. Backed by global investors the likes of IDG and Sequoia, it is rumoured be considering a record-breaking $47bn IPO in 2021.
 
Investors love a good growth story and brands like Boohoo and Shein tick all the boxes. Worryingly, however, the fashion industry is widely believed to be the second most polluting industry in the world. The sector’s dominant business model of fast fashion has long been criticised for encouraging hyper-consumption and a “throwaway” culture — as personified by Boohoo and Shein. The apparel industry’s climate impact is expected to increase 49% by 2030, almost equivalent to the annual United States’ greenhouse gas emissions of today.
 
Change is necessary. But in order for significant change to happen, the finance industry will need to acknowledge its part in supporting fast fashion’s detrimental effect on the environment. There is power in the way capital is allocated and financial incentives or penalties seem to be crucial if fast fashion companies are to clean up their act.
 
A report by Boston Consulting Group and Fashion For Good estimates that a financing of $20 billion to $30 billion per year is needed to achieve a step change in sustainability by 2030. In the global transition towards net-zero, it is increasingly clear that the roles that the fashion and finance industries play are more intertwined than ever.

News

Transport secretary Grant Shapps confirmed that the Balearic Islands, which include Ibiza, Majorca and Menorca, will be moved back to England’s amber list starting 4 am on Monday. At the same timey, people who are fully-vaccinated as well as under 18s will no longer be expected to isolate after returning from an amber list country starting next Monday.
 
Prime minister Boris Johnson revealed he will be taking “practical steps” to crack down on the racist abuse faced by some players after England lost to Italy in Sunday’s Euro 2020 final, as he promised to ban social media trolls from attending football matches in the future. An online petition for the Football Association and the government to ban those who have carried out racist abuse from football grounds for life has reached over a million signatures.
 
The National Food Strategy authored by Henry Dimbleby, founder of chain restaurant Leon, calls for a levy of £3 per kilogram of sugar and £6 per kilogram of salt to be introduced, which Dimbleby insists will be able to cut Britain’s average daily intake of calories by 15 and 38 calories. Other suggestions in the report include reducing meat intake and encouraging people to eat fermented plant protein and other meat alternatives instead. (£)
 
A new report from the Academy of Medical Sciences warned that the annual flu season during winter in addition to a third wave of Covid-19 and other seasonal respiratory viruses could potentially overwhelm the NHS with as many as 60,000 people predicted to die as a result. Scientists have called for an enhanced flu jab programme and rapid tests for flu to help mitigate said risks.

Business and economy

According to the Office for National Statistics, the number of open jobs between April to June 2021 was 77,500 above its pre-pandemic level in January to March 2020. Figures suggest that unemployment rate decreased slightly between March and May 2021 to sit at 4.8%, with an uptick in employment and the number of hours worked.
 
Barrie Deas, chief executive of the National Federation of Fishermen’s Organisations warned that discussions between the EU and UK over fishing quotas will remain “politically toxic” for decades, as the deal agreed with Brussels last year failed to reclaim UK coastal waters exclusively for British fishing boats. He cautioned that the UK government plans to increase marine protected areas and expand areas of the sea covered by wind turbines would further reduce fishing opportunities for the industry. (£)
 
The John Lewis Partnership announced they would cut an additional 1,000 jobs after the company said it would remove a layer of managers across its department stores and Waitrose supermarkets. Since the start of the pandemic, approximately 4,423 workers have lost their jobs at John Lewis while the number of department stores fell rapidly from 51 to 34.

Columns of note

England’s national football team may have lost to Italy during the Euro 2020 finals, but they have won the hearts of many across the nation. Indeed, a brief scroll through social media will reveal an outpouring of support for Marcus Rashford, Bukayo Saka and Jadon Sancho. David Goldblatt writes in The Guardian how this youngest generation of socially conscious footballers – public campaigners for hungry kids, social and racial justice and LGBT inclusion – represents the kind of country we can and should aspire to be.
 
President Macron announced earlier this week that vaccine refuseniks in France will soon face restricted access to entertainment venues such as cinemas, cafés and shopping malls as well as public transport. Approximately one million people have come forward to book an appointment since then. Jawad Iqbal highlights in The Times why a mandatory vaccination policy should similarly be adopted in England. (£)

Cartoon source: The New Yorker

Markets

What happened yesterday?

London shares ended in the red on Wednesday, after figures published on Tuesday showed that consumer price inflation in the UK has risen to its highest level, 2.1%, in almost three years in June.
 
The FTSE 100 fell by 0.47% to end at 7,091.19, and the FTSE 250 ended the session down 0.77% at 22,750.04.
 
Sterling, on the other hand, was a mixed bag, as it last traded 0.1% weaker against the euro at €1.1718 but gained 0.3% on the dollar at $1.3856.
 
Meanwhile, in the US, stocks gave up early gains and turned mixed during trading on Wall Street on Wednesday, as second-quarter earnings from some of the biggest financial institutions – the likes of Bank of America, Citigroup and Wells Fargo – were published.
 
The Dow Jones Industrial Average rallied by 0.13% to end at 34,933.23 while the S&P 500 was up by 0.12% to 4,374.30. The Nasdaq Composite dipped by 0.22% to 14,644.95.

In company news:

Slaughter and May, one of the UK’s top law firms, is testing a series of “switch on/off” schemes for its junior associates which include job shares, reduced hours and options for unpaid leave in a bid to combat staff burnout. (£)
 
Blackrock’s assets under management swelled to a record $9.5tn in the second quarter of 2021, as it reported a 32% year-on-year rise in revenue to $4.8bn.
 
Sumitomo Mitsui Financial Group agreed to pay $386m for a 4.9% stake in Jefferies, marking a return to US-focused M&A by Japanese banks after a hiatus of more than a decade.

What’s happening today?

Finals
Gore Street En.
Polar Capital Technology Trust
Red Centric

Trading Announcements
Costain
Experian
Galliford Try
Hays
Johnson Service

AGMs
Airtel Africa
BT
Distil
Electrocomponents
French Cnctn.
Helical Bar
Mind Gym Plc
Renewi Plc
Starcom
Water Intel.

UK economic announcements
(07:00) Unemployment Rate
(07:00) Claimant Count Rate

Int. economic announcements
(07:00) Wholesale Price Index (GER)
(07:00) Consumer Price Index (GER)
(13:30) Import and Export Price Indices (US)
(13:30) Philadelphia Fed Index (US)
(13:30) Continuing Claims (US)
(13:30) Initial Jobless Claims (US)
(13:30) Industrial Production (US)
(13:30) Producer Price Index (US)
(14:15) Capacity Utilisation (US)

Source: Financial Times

did you know

A report by Business of Fashion revealed that three out of five fast fashion garments end up in a landfill within a year of purchase. (Source: Zeitegist)

Parliamentary highlights

House of Commons

Oral questions
International Trade
 
Business Statement
Business Questions to the Leader of the House – Rt Hon Jacob Rees-Mogg MP
 
Backbench Business
Debate on a Motion relating to the Beijing Winter Olympics and Chinese Government Sanctions) – Tim Loughton, Conservative, East Worthing and Shoreham
 
Backbench Business
Debate on a Motion relating to the Northern Ireland Protocol – Sir Bernard Jenkin, Conservative, Harwich and North Essex
 
Ten Minute Rule Motion
Tibet and Xinjiang (Reciprocal Access) – Tim Loughton, Conservative, East Worthing and Shoreham
 
Adjournment
Alternative student finance – Stephen Timms, Labour, Eastham

Scottish parliament 

The Scottish parliament is in recess until 30 August but will be recalled on 3 August for Covid updates.

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