Britain's high street fashion giant Primark was at the centre of a storm last night over allegations that illegal immigrants paid just over half the minimum wage had been employed to make fashionable knitwear for one of the firm's bestselling ranges.
Primark announced yesterday that it had launched an inquiry after an investigation by the Observer and the BBC revealed that Manchester-based garment firm TNS Knitwear may have breached key employment and immigration laws. Breaches of the legislation could lead to fines of up to £10,000 for each illegal worker and potential prosecution for tax evasion and employment law abuses.
Primark also said it had handed material uncovered by the investigation to the UK Border Agency.
The workers, caught by an undercover journalist on a hidden camera, were allegedly being paid £3 an hour - just over half the minimum wage of £5.73 - for 12-hour days, seven days a week. Many of the garments made by the Pakistanis, Afghans and Indians over the past five months had ended up two miles away in one of the retail giant's largest and most profitable stores in Manchester's bustling Market Street.
The allegations were put to Primark this weekend, five months after an undercover investigation began into Primark's British supply chain. The investigation focused on Manchester's textile industry and in particular TNS Knitwear, which supplies 20,000 garments to the firm every week. Fashion Waves, a supplier used by TNS, was also investigated.
Employees at both TNS and Fashion Waves were caught on film admitting their illegal status in the UK. One Pakistani working on a Primark order tells how his visa had run out eight years ago, yet he had remained in Britain working under the radar of the authorities. Working conditions inside both TNS and Fashion Waves were also exposed as cramped and cold, in breach of health and safety regulations. Most dramatically, the undercover journalist working at both units captures cash-in-hand payments being made to her for gruelling hours. The money, apparently paid without the knowledge of the taxman, amounts to about £3.50 an hour, £2.20 less than the minimum wage. TNS Knitwear denies the allegations, and there was no comment from Fashion Waves.
A Primark spokesman said last night that the issue was now a matter for the authorities. "Primark was informed this week that one of the UK factories from which it buys some knitwear has allegedly broken a number of UK employment, tax and immigration laws," he said. "Primark is conducting its own investigation. Once that investigation is completed, it will decide how to proceed. Meanwhile, Primark has handed all relevant information passed to the company over to the relevant enforcement agencies so they may take action.
"We are extremely concerned about the very serious allegations made against our supplier TNS Knitwear and against TNS's unauthorised subcontractor, Fashion Waves."
Meanwhile, the firm agreed last night to remove all references to the Ethical Trade Initiative, the trade body that monitors Britain's top retailers, from its 140 storefronts across England, Scotland, Wales and Northern Ireland.
The firm, as part of an agreement made with the ETI on Friday, must also remove ethical branding from thousands of tills and its corporate website while investigations continue.
TNS Knitwear, which supplies some of Britain's most famous brand, is run by Pakistan-born Zahid Sarwar, a British citizen and TNS director. Last night it denied any wrongdoing. TNS Knitwear has made millions over the past five years from the so-called "fast fashion" phenomenon where garments are tracked and rapidly reordered to make sure they keep flying off the shelves. Sarwar's solicitors confirmed to the Observer that the company had been audited by Primark in the past six months.
Primark said yesterday that it had initiated a "timed remediation programme" following the audit. TNS was a "relatively small supplier", Primark added, saying that if the allegations proved to be true, a deliberate attempt must have been made to mislead auditors.
On Primark's website, www.ethicalprimark.com, the code of conduct reiterates the conglomerate's stance that wages and benefits paid to suppliers to their company for a standard working week must meet national legal standards or industry benchmark standards, whichever is higher. The same website states that working hours must comply with national laws and benchmark industry standards, whichever affords greater protection. The firm also claims to adhere to the ETI code of conduct.
Last night, the ETI said in a statement that it was investigating the latest scandal to hit Primark.
"We are horrified at the allegations of abuses exposed by this investigation and we are particularly concerned that they involve an ETI member. First, we have met with Primark and demanded that it provides us with a prompt, full and frank response to the allegations. Where they are substantiated, the company has a clear obligation to work with the suppliers concerned to put things right.
"Second, we have immediately launched a formal inquiry to establish whether or not there is a systematic failure on Primark's part to implement the ETI base code. If such a failure were established, this would be grounds for formal sanctions."
But last night Primark hit out at the ETI for forcing it into removing its ethical branding. A spokesman said: "Primark is surprised and disappointed with the public stance adopted by the ETI... The ETI is prejudging the situation by adopting this stance before Primark and the relevant UK authorities have even had the opportunity of investigating the allegations made about TNS, let alone report on the outcome of those investigations to the ETI."
Primark is expanding more rapidly than any other British retailer. The company is planning to expand to Portugal, Germany and the Netherlands in 2009. Meanwhile, British shoppers can expect more new stores in the UK, where Primark already operates 4.8 million sq ft of retail space across 140 stores, employing 25,000 people. Its flagship Oxford Street store sold more than one million garments in its first 10 days of trading.
Primark's parent company, Associated British Foods, which also controls Selfridges and owns Twinings, Ovaltine, Ryvita, Jordans and Patak, as well as multi-billion-pound sugar and agriculture interests, regards Primark as the jewel in its crown. Boosted by Primark's profits, the company last year posted revenues of £8.2bn.