Boohoo to move 40% of production overseas after Leicester scandal City broker claims

A leading City analyst today predicted online fashion group Boohoo would have to move 40% of its manufacturing base from the UK to combat the scandal over alleged poor conditions in its Leicester suppliers' factories.

Credit Suisse said moving four out 10 of Boohoo's UK manufacturing was its "base case" forecast as the company fights to regain its reputation.

Analyst Szilvia Bor predicted a substantial change in the company's business model which could make it slower to respond to shoppers' changing fashion needs as it moves more offshore and potentially higher prices due to the extra expense.

Profits would fall by about 30% by 2022 if her predictions were right, she said.

The Evening Standard revealed this week that Asos had tried to increase its number of Leicester factory suppliers two years ago but U-turned after finding poor working conditions there. It ended up quitting two factories for failing to meet its ethical standards and moved more production overseas.

Boohoo today fiercely refuted Bor's claims, saying it was determined to stick with its UK supplier base and work with them to improve conditions. "We remain firmly committed to UK manufacturing and enforcing the highest standards of ethics, compliance and transparency for the benefit of all garment workers," a spokesman said.

Boohoo shares have fallen more than 45% since the Sunday Times alleged that some of its suppliers' workforce in Leicester were being paid as little as £3.40 an hour for clothes destined for its NastyGal label.

Credit Suisse's Bor also suggested that a minority of Boohoo's customers representing around 5% of sales would desert the company due to the reputational damage.

Having previously forecast the company's shares would reach 440p, she today slashed her forecast to just 250p - only 25p higher than the current price.

She added in her note to clients: "The robustness of the group's response remains to be seen."

Boohoo has announced an independent investigation into its supply chain to be led by Alison Levitt QC. While Bor welcomed the review, she said the impact of it would depend on the terms of reference.