[Source: Reuters]

Britain’s financial regulator is taking longer than usual to approve fast-fashion retailer Shein’s IPO because it is checking its supply chain oversight and assessing legal risks after an advocacy group for China’s Uyghur population challenged the listing, according to two sources close to the matter.

Britain’s Independent Anti-Slavery Commissioner, a monitoring body of the interior ministry, has also raised concerns within government over a Shein IPO because of allegations about labour practices at its suppliers.

Singapore-headquartered Shein, which sells $5 tops and $10 dresses mostly made in China in 150 markets worldwide, filed confidentially with the Financial Conduct Authority in early June for a London listing.

Shein is also awaiting approval from China’s securities regulator for its London IPO, two separate sources said, adding that the approval would likely come after the FCA’s decision.

The advocacy group, Stop Uyghur Genocide (SUG), announced a legal challenge in June and sent the FCA a dossier in August alleging that Shein uses cotton from China’s Xinjiang region.

The U.S. and NGOs have long accused China of human rights abuses in the Xinjiang Uyghur Autonomous Region, where they say Uyghurs are forced to work producing cotton and other goods.

Beijing has denied any abuses.

Shein declined to reply to Reuters’ questions about the FCA process. Shein has a zero-tolerance policy for forced labour and is committed to respecting human rights, a spokesperson for the company has said.

The company last week announced a global external ESG advisory board, opens new tab to bolster its governance.

In a sustainability report published in August, Shein said it found two cases of child labour in its supply chain in 2023, and no cases of forced labour. Like Primark and other apparel retailers, Shein uses isotopic testing service Oritain, opens new tab to verify the origin of its cotton, which accounts for 9.9% of the textiles in Shein-branded products, opens new tab.

The FCA declined to comment on the listing and any delays. A spokesperson for the FCA said timelines for IPO approval depend on each individual case. Market experts say it usually takes several months to reach a decision.

The FCA is under no obligation to assess evidence presented by civil society groups, and will generally let investors take their own position, said Lorna Emson, partner at law firm Macfarlanes. If it did find compliance concerns, it would tend to address these confidentially with the company itself.

But NGO pressure is unlikely to fade.

NGOs are not alone in raising concern over Shein’s IPO.