Shein’s stock market deal could be the biggest ever in the UK – and one of its most controversial

After many months in which the narrative has been dominated by the London Stock Exchange’s best companies heading to Wall Street in search of new investors and higher ratings, the City appears to have lured a bright new bauble.

Fast fashion giant Shein, founded in China but now headquartered in Singapore, is expected to confirm plans to sell shares in the business on the LSE within days, in what will be the City’s biggest-ever initial public offering (IPO) at more than £50bn.

This, we are told, is a coup for the nation’s ailing financial centre. Britain’s politicians certainly see it that way – chancellor Jeremy Hunt met with Shein’s executive chair Donald Tang to make London’s case, while Labour has also been making positive noises about the prospect of the company making the capital its new home.

However, the political and financial lovebombing of the company has done nothing to obscure an uncomfortable fact: the LSE has only landed this white whale because New York turned up its nose.

Shein is one of those companies to which the word “controversial” is inevitably applied, not only because it operates in a controversial industry but also because of how it operates in that industry.

Shein’s clothes are, as you might expect, ultra-cheap. I found a set of PJs for less than a fiver, a dress for under £7 and a men’s hoodie-tracksuit for just £7.49. The company’s success has been built on its ability to get aggressively priced clobber up and online fast. But those rock-bottom prices and the company’s super-sophisticated supply chain management have inevitably raised questions about what it all means for the garment workers in terms of pay and conditions. In Shein’s case, the issue has been all the more piquant because of its Chinese roots and the longstanding concerns voiced about the country’s treatment of its Muslim minority Uyghurs.

Last year, a bipartisan group of US congressmen and women wrote to Gary Gensler, the chair of America’s Securities and Exchange Commission, to raise “serious concerns”. They highlighted issues including “underpaid labour in its supplier factories” and the company’s human rights record. The letter cited a Bloomberg analysis that touted “scientific evidence that cotton from the Xinjiang Uyghur Autonomous Region (XUAR) was present in clothing sold by Shein in 2022”.

Sixteen attorneys general also sent a letter to Gensler asking the watchdog to ensure that Shein could “independently verify” it doesn’t use forced labour before being permitted to go public.

NGOs haven’t been slow to raise concerns, either. A report by the Swiss-based Public Eye about the working conditions at the factories of some of Shein’s third-party suppliers prompted a lengthy response from the business.

“While we do not recognise many of the allegations in this report, the discussion on working hours and wages raised by Public Eye is important to us, and we have made significant progress on enhancing conditions across our ecosystem,” Shein said in response.

Allegations about the use of forced labour have, meanwhile, been strenuously denied, and the company says it no longer sources any of its cotton from China.

Some of its problems are clearly political. Shein has been caught up in the tensions between Beijing and Washington, and in an election year in which the two main American parties are competing to be tough on China, a New York float is thus off the table. London is set to be the beneficiary. Shein will, in the process, likely become one of the biggest members of the FTSE 100 index of leading stocks.

It should be noted that the company’s labour issues are far from the only point of controversy. There are real questions over the environmental impact of so-called “fast fashion” and its exponents.

Uncomfortable with any or all of these issues? If you have money invested in stockmarket index-tracking funds – and you probably do if you have a private pension or ISAs – and the float goes ahead, you’re going to have to swallow your concerns. You’ll be along for the ride.

Like it or not, London’s declining status means it will welcome whatever business it can get with open arms. This probably won’t be the last time the City gets one of New York’s cast-offs and then celebrates it as a “coup”. The politicians’ response speaks volumes. In a post-Brexit world, beggars can’t be choosers.