Bloomberg Audio Studios, podcasts, radio news.
Mag Have you ordered anything from Shane I imagine The answer is god no.
Imagine like no, I have a guilty sha Former.
Welcome to the City of London.
The City of the city, the City of London.
Please mind the gap between the and the platform, the financial hearts of the country.
The city, the city.
Welcome to in the city, clear of the door.
Hi everyone, good to have you back for another week of In the City, where we unpack the stories dominating the conversations of policymakers and power brokers the world over. I'm fronting Laqua.
I'm alegra Stratton Alecra.
Have you ever ordered anything from the Chinese fast fashion giant shean.
On thousand percent.
No, I'm unsurprised.
Actually no, I'm upset that you're unsurprised, but no, clearly clearly so I came across it obviously in the work we do on sustainability, because it has a very bad environmental impact. I think the algorithm is very interesting. So the idea that they can see really quickly what's popular and then they make more of those. So I think that is fascinating and obviously innovative, but it's being used to the wrong ends.
So it's an interesting story because, on the one hand, if the listing does go ahead, then it has a possible valuation of fifty billion pounds, so it'd be big enough to quiet some of the doomsday chatter around the ukipl market. But then, as you say, there's ethical questions.
Yes, and very very recently, a couple of years ago, the City of London was talking a lot about being the global center of green finance. So what does that mean, Well, it means a number of things, but including it is that we have regulations that are supposed to get companies to demonstrate their transitioning away from carbon intensive activities, which is I think would be a stretch for Shining, sorry, a stretch for Shin to demonstrate.
Yeah, we're not sure how to pronounce it.
So in today's episode, it's Shine from now on.
In today's episode, we're going to talk about what it means for London now that it's inching closer to a listing with US opinion calmness to Andrew Felsched, who definitely knows how to pronounce it. She oversees consumer goods and the retail industry and Alvaret reporter and read Out newsletter writer as well, So thank you both for joining us. Andrew talk to us about She Shining, like how many clothes do they sell and make?
They had failed last year of twenty three billion dollars and they said they want to increase that to sixty billion by twenty twenty five, so that you know, that would be sixty billion, would be ahead of Indetect, which is it's, you know the world's biggest sort of clothing retailer. So you know, it is very sizable.
Into technics, is Zara and so on?
Isn't it Bara? Yes, exactly, So I mean it's very sizable. It's not like a conventional retailer. It doesn't have shots, it doesn't have you know, warehouses here, and it picks things out see what people are wearing on social media. It comes them through its algorithms system, and that goes to five thousand suppliers in China and then the sin ship thing it ships things from China direct to consumers
in the US and the UK. So I think the first question for investor is what exactly are you being asked to buy shares in this ica?
Andrew, I'm on the website. So first of all, right, and I see, I mean they're telling me I can get a shean vacation woman's flower ensemble for a three pound forty nine. I mean, has it possible to make anything for three pounds?
Well, they claim that their system is very efficient, and what will happen. They will they will only make one hundred to two hundred pieces of any item, and then if it proves popular lots of people like that flower ensemble, then they will decide to make more. And they claim that that is very efficient and that's the way they can keep prices down. Now British retailers have another view because these items which are you know, typically you just
mentioned very cheap, they come direct from China. If they're a hundred, one hundred and thirty five pounds each, they're all in small packages. The beach one is under one hundred and thirty five pounds. It doesn't pay tax on that order, so that immediately it doesn't attract taxes. That immediately makes things chink, and all retailers make them authority of their product. Now in Asia might not necessarily China.
Lots of moved out China, but they will bring those over and containers to UK distribution centers and then they will you know, get them out to consume homes or to their doors, so that they want that crack down on because you know, they're saying that that does make things cheaper.
However, it's difficult for an incoming labor government, isn't it. We're on one hand, well not. On the one hand, you have a huge part of that party is interested in environmental protections and standards. Another part of it, overlapping but slightly different, is interested in workers' rights. But then there's that central core interested in all those things too. But they're wanting to demonstrate that the city of London is going to be back on its feet very quickly.
So it's a bit of a headache for them a bit.
Yeah.
We have reporters or I reported with with colleagues that Labor is not going to block this, that they've had various meetings with she and FIRSU and DeVos or in London arranged by the London Stock Exchange, and they basically gave them assurances that they're not going to block it. So they have made their decision. The headline is that they are open to this because it's a big listing, but they are careful to add a certain number of caveats,
I suppose. So you mentioned the sort of the concern over workers' rights, I mean some particularly concerning stories about basically slave labor in Shinjang, which she and has denied. Labor is saying that the benefit of she enlisting here would be that she and would then be subject to UK employment regulations, and so it's actually better to have a company like that being brought under UK regulation, And they want even more places listing in the UK so
they can regulate them in line with British law. Essentially, I'm not really sure if that will wash with parts of the Labor Party. I mean you mention and the concern about environmental standards, which is a big concern with she and in fast fast fashion. But also you know, it's called the Labor Party, it's the it's the it's the party of organized Labor of workers. That the clues in the name Angela Rayner is making a big part of her sort of mission as Deputy Prime Minister shoring
up workers rights. There are loads of concerns about that, but there's also, i think the more complicated thing about their Securonomics.
Offer.
So they basically have made this pitch that their economic model will be one that shores up UK security at home, so not having to outsource things like energy to foreign pars, but then also just sort of protecting bits of British industry from Chinese influence and so she and it was sort of originated in China, It's not based out of Shanghai, but this is sort of essentially putting a big Chinese company on the London Stock Exchange. Their concerns there as well.
But al I mean, I feel like it's difficult to regulate, right, I mean if they don't have their employees here, if the supply chains are here, I don't see how any regulator, you know, based in the UK would be able to give workers' rights to someone who abroad. And the SEC also said that it wasn't too keen to have them on because of some of these concerns.
But also think of the business model, right. The reason why that that fetching whatever that number is you're looking online and probably going to buy is three pounds forty with.
The flower ensemble.
As soon as you start to regulate, then you're going to push up the cost of various different bits of their model, so you're going to break the way that they make money.
But I wonder whether the Labor Party feel like there's so much under pressure because they want to show that their business friend they almost at any cost.
Yeah exactly. I mean, as you say, the minute you start probing that line, you think, how does that really work? You know, you're not necessarily going to be based in the UK, you're just listing here. But that's kind of their argument that they have to make really to keep
parts of the party happy. But they've clearly just made this calculation that they don't want a big headline Labor blocks the possible biggest listing ever in London on the London Stock Exchange, that they are just they just want to be seen to be pro business, pro growth. So much of actually what they want to do in government is reliant on private sector investment because they don't feel
like they have much money themselves. So many of their models are sort of government puts in one point hoping that you get four point from the private sector. So they are really reliant on just vibes and that message to the private sector, hoping that they can make up the difference where they're not investing, the private sector can, and they're putting that basically above all those other concerns.
Andrew, you wrote that you know London needs to be careful. It doesn't well, it doesn't become the sloppy seconds to New York. Does it actually I mean, you're right instinctively,
but does it actually matter. There are people commentators out there that we don't read as much as we read you, Andrea, but they are saying, you know, London needs to be careful about about Alva's point about vibes, to be careful about the sort of id it's presenting to the world by being the place that is happy to have this listing.
I totally agree. I think that is the bigger danger. Whenever you look at this, there is risk with this company, and to say that, you know, we want something that is this risky, I don't think sends a great message that said everything got to prime. So what you've got with san is you've got these risks that you've also got a high valuation. We don't have all the numbers, you know, I had to make a lot of assumption to figure out what it would work, but I got
to basically a similar rating to Indetect. And when you think, you know in Detect is you know the biggest clothing retailer, it's you know, it's aren't its track record for many years doing phenomenally well. Zara, and you've got she In, which, as we've discussed, has all these issues, is coming in at the same value toation. Okay, so we've blund and wants it. It's got to be prime to the fact that you make invested comfortable with the risk.
I just want one more from me, but it's probably a bit niche inter Tech is interesting because with Zara you can actually see their price point is it's not as low as she In, but it is it is not extortionate either. But what you're seeing is they're putting some of their money, not enough for some campaigners, but some of their money into innovation to bring in the fabrics that are lower impact on the environment. So you know there is that there are actually these models out there.
The debate is can you actually have environmental fast fashion? Like is it an oxymoron?
Yes?
Exactly that they are all trying, not just in Detect, I mean H and M. It really has been doing a lot on this big years it was it's put you know, sustainability at the heart of the business model. Even Primart. We think Primar is very fast fashion. They're doing a lot with recycled fabrics and.
You know they are all is possible.
Basically it's possible. I mean, you're not going to get a zero you know, impact from pass fashion. But the more you can get people to just wear things more no handt minimized the impact. And let's forget even luxury isn't risk free. You know, a lot of luxury you've got things would like the leather, the metal class for Kashma all. Yeah, all of these things have environmental.
I think the big caveat and all of this is that even though I've said Labor has given she in reassurances that they won't block this, they caveat that was saying that they haven't done their full due diligence yet. And so even though she has sort of begun the process of listing in London, we know that that won't happen until the end of the summer, which means that even though we're in a general election campaign, Parliament will
be back before this can happen. And there are Labor backbenchers people like Liam Burn who have concerns about this and who do want to have parliamentary scrutiny if she in before it can list in London. So I don't think that this is a done deal by any means. We can see the direction of travel from the Labor government in terms of them just wanting this big listing. But what will happen?
Who is an election? Maybe Jeremy Hunt.
But the thing is that we don't know how bad, how actually how bad for a lack of a better term, Shean actually is right. I mean Primark is maybe the closest we could compare her to. I mean they went through like factory collapses. This is not only not environmentally, this is you know, could we could look at child labor. Do we have any of those facts of how it actually operates or is that what labor is waiting for?
Well, definitely they would say that they've had a lot of questions in their meetings with Sheen. But it's interesting that they they have mentioned a lot of the lines that I heard from Andrea there, you know that pitch that they're actually not as environmentally bad as they say they are because they aren't built, they aren't making all those clothes right away. They're seeing which ones perform. Well,
they commission a lot, make us more, Yeah, exactly. And you know, so they've been kind of making that pitch to labor. Labor signs kind of persuaded by it, and maybe because they're hearing what they want to hear. But definitely there is that big caveat they haven't their full due diligence. You know, there have been some very concerning stories of actually and in multiple directions. So I don't
think that this is a done deal. And I especially think the Conservatives, if they are in opposition, there's so much sort of China skepticism. We saw what happened over Huawei. I think you could really see this crystallizing as a sort of early issue the next government.
Nigel Farage is against it.
But this is also it comes on the back of you know, maybe the last ten to fifteen years loads of listings from Russia. I mean, we had all the medals right companies being listed here and that then went on to bagfire.
So this is this is the thing rand I mean that that you know, if you were to marshall Defense, you would say that many companies listed in London have not fantastic environmental standards, but we're you know, we have as you say, mining, we have lots of oil and
gas and so on. What against that is actually a lot of the regulations that have come in the last couple of years have expected and put expectations on them to do transition plans and to be demonstrating that they have maps and understand their carbon emissions.
But I think, and I would argue and Andrew, it probably the best place to answer this that you can have a company that pollutes because of fossil fuel, which is maybe different to child labor, which we don't know if that's happening, Andrew. But how difficult is it on such a large I mean, if they're valued at fifty billion or thereabouts, this is a massive company. Supply chains
are probably all over the world. A lot of them are ear in China, So how difficult is it to have that due diligence to understand where they do them.
One way to maybe think about that is they've got they talk about five thousand supplies. A high street retailer in the UK would have hundreds of suppliers. So immediately you've gotten bigger. Now she And say that last year they audited ninety five percent of their suppliers and only a very small amount were found to not be compliant and they stopped working with those. So that's all very good, But I think I think it's just scale that thousands hundreds.
So if you've got a high street retail of hundreds of suppliers, they all have like a lot of auditors on the ground. So for five thousand suppliers, you need even more auditors on the ground. I think she AND's got to come out and show what it's doing in its supply chain, show that how it's auditing, how often it's auditing, how many auditors it've got, what they find and what they do if they find something they don't like,
and how they're getting rid of it. I think it got it's really got to explain that, you know, in great detail, and it will you know, if it lists, it will have a prospectus, and it's really got to set that out as much as it can.
You're right, Andrew, that's what's going to be said if we get a labor government, and it's a labor government that says it puts impact on the environment front and center and they made a great deal of this in their in their perspectives so far. It will be interesting to see in reality what that means, how much you're actually going to get, you know, rather than an assertion, don't worry, we checked ninety five percent of our supplies and we kick the ones out that we didn't like.
They're actually gonna have to demonstrate that. They're going to have to demonstrate that they've carbon mapped every bit of their business. They're gonna have to demonstrate Alva's point in numbers rather than in assertions that actually, because they don't
waste so much, they're lower carbon in that way. You know, these do sound like, you know, benign practices, but they'll have to show that rather than assert it, and that will be such an interesting, you know test in detail of the Labor government's commitment to the environment and climate.
But if for ethical reasons, Labor says no, do they have enough support from the business community to be able to still show that they're business friendly and able to attract capital to the UK.
Oh it's hard to know. I mean, I get the impression that business leaders are quite impressed by Rachel Reeves and here Starmer, she's done a lot of work to you know, have lots and lots of business breakfasts around here in the city for the past few years. Jonathan Reynolds as well, the Shadow Business Secretary, the person who has been meeting with she, and he's done a lot
of work on that. But I get the impression from speaking to colleagues who speak to business leaders all the time that they're less sure about Angela Rayner that we were talking about vibes that she has a different vibe in terms of her relationship for image towards business. And she's the person, of course, the sort of figurehead of their workers' rights reforms, and so I think that it
will be interesting. This is just one example of where all these tensions that we said workers writes the environment but then being pro business I think might come to a head in government. We've seen it on that so called new deal for working people their work rights reforms. Different people in the shadow cabinet take a different view on that. Some people have been pushing for that business consultation, other people don't want it. I don't think she and
has been discussed by everyone in the shadow cabinet. We haven't necessarily seen Ed Milliband and Angela Rayn away in with a view. Yet that could happen in government.
So you know, given our understanding of how this Labor Party works, who would make the ultimate decision on whether the IP goes ahead.
Well, interestingly, it would be I mean it should be Ker Starmer, and he's unpredictable in this way. I mean, on a lot, you would expect the pro business side to win, so that'd be Rachel Reeves, Jonathan Reynolds. They should win out but they but they aren't winning on everything. On things like workers' rights. Angela Rayner has been winning those on those arguments. We've seen it in recent weeks, so I don't think it's as clear cut. And that's actually,
you know, the bigger fascination. If we do get a labor government, Ker Starmer will call the shots, and we don't know exactly what to expect from him. You know, sometimes we think we know and then he sides with other people and his party doesn't.
It also depend on where they're at in the cycle and what they've just been beaten up for. I mean, if I think about when they ditch the twenty eight billion climate pledge for low carbon tech that they would invest twenty eight billion, and then quite soon after they were being quite protective of the workers' rights program because I think you're trying to kind of plicate different parts of the party at any given time, aren't you. Yeah.
And also I think it depends on whether it's actually about money or not, Like they are quite clear, like to the twenty eight billion if they want no uncosted, manifested commitments, and they feel like they've have to ditch that, But on other things where the money is not so involved, they feel like they can be more radical, and that's where Kirstarmer tends to come down.
So what kind of timeline are we looking at for Sheen?
What happens We're looking post election, We're looking at what happens when Parliament comes back, what kind of scrutiny they instigate of Sheen and then and when they plan to sell their shares towards the end of the summer, if they managed to get to that point.
Aw Well, Andrea, thank you so much, thanks for listening to this week's In the City from Bloomberg. This episode was hosted by me Franz and LaQuan and Alecra Strackson. It was produced by Summersaudi production support and sound designed by Moses and dam Brendon. Francis Newman is our executive producer. Sage Bauman is head of podcast special Thanks to Andre Felsted and Alvarey. Please subscribe, rate, and review wherever you listen to podcasts