Retailers cancel £2.5bn of orders from Bangladesh amid coronavirus crisis

Businesses including Arcadia, Frasers Group, Asda, Debenhams, New Look and Peacocks have all cancelled contracts in recent weeks as retailers grapple with the impact of the coronavirus pandemic.

Some retailers, such as Primark, have pledged to pay for their orders in a bid to support suppliers through the crisis.

Last week, the value fashion giant’s parent company, Associated British Foods, committed to shell out £370m for orders in addition to the £1.5bn of stock it already has in stores, depots and in transit.

Primark chief executive Paul Marchant said at the time of that announcement: “We have been in close and regular contact with our suppliers over the last few weeks to find a way forward and to pay for as much of the previously ordered product as possible.

“Our partnerships with our suppliers are invaluable and we want to continue to support them as we navigate our way through this global crisis.”

But despite Primark’s support, Bangladesh’s commerce minister Tipu Munshi said this would not be enough to prevent factory closures and called on the British government to intervene.

Munshi told ITV News: “The factories may collapse. They will not be able to pay key costs and may not be able to run again. That’s a major problem.

“The British government should take care of this. They have a responsibility. In our country, the government have taken positive steps to support [garment factories].

“The UK should have to support the retailers also, so there is stimulus, so they can take this load to support us.”

Bangladesh, which makes much of the clothing sold by UK retailers, is also in lockdown. The vast majority of its factories in the capital city Dhaka have been closed since March 26 – and the 4 million workers they employ have been told to stay at home.

The Bangladeshi government has offered low-interest loans to factory owners to help them pay their staff during the crisis, but it has not stepped in to pay salaries in the same way the UK government has.

Bethnal Green and Bow MP Rushanara Ali – the government’s envoy to Bangladesh – has written to chancellor Rishi Sunak to ask for help, or to force retailers to honour any orders they have placed with Bangladeshi factories.

Ali said that retailers cancelling orders “is causing workers to lose their only source of income, putting them and their families at risk of starvation”.

Asda said it had only cancelled 5% of orders from Bangladeshi suppliers, but is only paying 60% of the previously agreed price as a result of coronavirus.

A spokeswoman for the supermarket giant said: “We have and will be paying for over 95% of our annual orders as per the existing terms and conditions agreed with the suppliers involved.

“The 60% payment is for the five per cent of orders we aren’t able to take, payable within seven working days, significantly faster than usual terms for the fashion industry.”

ITV said Peacocks owner Edinburgh Woollen Mill would not reveal the value of the orders it had cancelled from Bangladesh, but admitted some suppliers would not be paid until their clothes were sold. Others will only be paid 50% of what they are owed.

A spokesman said: “This was an essential step as otherwise we would be taking delivery of stock we simply could not sell.

“We have since entered into negotiations with suppliers to find a solution that works.”

New Look, which cancelled 20% of orders from Bangladesh shortly after closing its UK store estate, has now reinstated some of the £6.8m of business it initially withheld.

A spokeswoman for the retailer said: “We regrettably had to inform suppliers we could not place new orders and would be temporarily postponing outstanding payments.

“We only did so out of absolute necessity. We have started making some supplier payments where we are able to do so.”