Britain should not bend the knee to China by wooing Shein just to save the stock market

There should be loud alarm bells ringing over why the fast-fashion giant is contemplating a UK float

In the battle to save the moribund stock market from becoming locked in a death spiral, there has been no shortage of ideas. Indeed, anyone trying to keep count might have given up by now.

In recent days, with the Budget looming into full view there has been a fresh plea for a “British-style Isa” – this time from City fund managers. As they point out, a trend of capital outflows has dogged UK equities for years, and this would help to reverse that. Where this particular proposal differs and hits stony ground is the suggestion that it should replace the existing Isa, effectively preventing British savers from investing outside the UK. Their argument is that the UK taxpayer is effectively “subsidising the cost of capital for overseas companies” at the same time as ‘leaving domestic companies vulnerable to them’, which is “illogical”.

Fair point but as plenty of critics have pointed out, punishing UK savers for buying stocks and shares overseas is a bad idea – returns for US equities over the past decade, for example, completely dwarf those in the UK. Far better to introduce an additional Uk-only Isa alongside the existing one.

The Chancellor may have other ideas. In recent days, it has emerged that Jeremy Hunt has been trying to persuade the Chinese fast-fashion giant Shein to rethink its plans for a stock market listing in America and go public here instead, which is an even worse idea than forcing UK savers to invest in British companies.

It is both desperate and ill-judged. The Government has proven time and time again that it is absolutely terrible at this sort of thing. Remember when Rishi Sunak rushed to hail Deliveroo’s arrival on the London Stock Exchange? A 26pc first-day plunge in its share price made a mockery of the then chancellor’s insistence on welcoming “a true British tech success story”.

But that’s nothing compared to risks that come with laying out the red carpet for a company like Shein. You can see the appeal, of course. If Sunak thought Deliveroo was trendy, it’s got nothing on Shein. The Chinese company is the go-to shopping destination of every fashion conscious teen and twentysomething with an iphone and a limited budget in the Western world.

In the space of a decade, the company has come from nowhere to become the most talked about name in retail by harnessing the power of technology and social media. Sadly, many kids today find entertainment in watching videos of young Tiktok influencers modelling piles of new clothes that can be purchased for a fraction of the prices found at H&M, Zara or other more established retailers. Videos made with the sheinhaul hashtag on Tiktok currently have 15.6bn views.

Questions have rightly been asked about whether its dirt-cheap goods come at a high price elsewhere. The latest to express disquiet about the true cost of Shein’s products are UK retailers and clothing manufacturers, who are concerned that it is among those exploiting the tax system to great advantage. Rivals are understandably exercised about short-sighted rules that allow online retailers to pay much lower customs duty bills by shipping customers orders in small packages.

As the Retail Sector Council points out, being undercut often by retailers that ship hundreds of millions of packages every year comes with real consequences. “More business failures, less taxation and more unemployment,” it warns. A campaign for a crackdown on the practice adds to a chorus of criticism about Shein’s business model. As well as a reputation for exploiting tax loopholes, there are concerns that the price of Shein’s dirt-cheap clothes is being paid for by those toiling away in its Chinese factories on low pay, long hours and in poor conditions.

An investigation by Swiss campaign group Public Eye in 2021 found evidence of staff subjected to 75-hour weeks in Shein’s Chinese factories with some working three shifts a day, often in unsafe conditions, and only getting one day off a week. The company promised to conduct a “targeted investigation” into the allegations.

Then, last autumn, a Channel 4 documentary reported that some Shein factory workers earned an average of £19 for a typical 18-hour shift, produced hundreds of items a day, and couldn’t go home until they had finished. In some instances, wages were withheld and docked. In response, Shein vowed to invest $15m (£12m) to improve standards at its factories.

Then there’s the environmental toll that comes with extreme throwaway fashion: overproduction; excessive waste; hazardous materials; and a gigantic carbon footprint. It may seem unfair to pick on Shein when many of the same misdeeds it stands accused of have been levelled at others in the fast-fashion industry including Britain’s own Boohoo. However, the difference is that while intense pressure from shareholders, MPS and campaigners has forced Boohoo to up its game, it’s hard to imagine a private Chinese retailer facing the same sort of duress from Beijing’s Communist regime, with its appalling human rights record and disregard for the planet.

There should also be some fairly loud alarm bells ringing in government about why Shein is suddenly contemplating a UK float. The only reason that Hunt has been able to get an audience with Shein’s dapper chairman, Donald Tang, is because he doesn’t like the disclosures that the American authorities are demanding.

There is concern in Congress around allegations that Shein uses forced labour and though the company has said it has “a zero-tolerance policy” for such practices, some senior US politicians are yet to be convinced. We should be applying the same caution and scrutiny, otherwise the pursuit of Shein risks being part of a wider race to the bottom. There are other, less grubby ways to inject some life back into UK stocks without lowering our standards and bending the knee to China.