UK value fashion retailer Primark has set up a fund to cover the wages component of orders that it cancelled in Bangladesh, Cambodia, India, Myanmar, Pakistan, Sri Lanka and Vietnam because of the coronavirus pandemic.

The retail group, owned by Associated British Foods (ABF), has been widely criticised for cancelling all orders with its suppliers after closing all its stores on 22 March. The company, which is losing sales worth GBP650m every month because of the closures, asked suppliers to stop production as it already had some GBP1.6bn of paid-for stock in stores, depots and in transit.

Primark says it offered extended payment terms to suppliers to enable it to take and pay for further stock ready for shipment. “This is despite the fact that nothing can be sold while the stores remain closed.”

In a statement today (3 April), Primark says it is concerned about the impact of workers engaged in production on further orders that it will now not be taking – that is, goods in production that were due for shipment in the month following cancellation of orders. 

As a result, the retailer will fund payment of the wages that relate to this product, taking into account adjustments for government support packages provided in each country. This action will cover orders from Bangladesh, Cambodia, India, Myanmar, Pakistan, Sri Lanka, and Vietnam.

In consultation with external stakeholders, it says the Primark Ethical Trade team will explore mechanisms to ensure that this money reaches workers.  

Over the past two weeks, Primark has also been working with the United Nation’s International Labour Organisation (ILO) in order to collaborate with governments, international financial institutions, development banks and others in a position to make available medium and longer-term financing to pay the wages and benefits of workers along with economic support to the garment industry.

“Every one of our stores around the world is closed. With a backlog of stock in stores, depots and in transit, we have had to make the very difficult decision to cancel orders for future stock. Finding a way to ensure that workers in our supply chain in these countries are paid has been a priority over the past two weeks and we are pleased that this fund will provide relief to these workers,” says CEO Paul Marchant, who has requested his base pay be reduced temporarily by 50%

“Our focus now is to work with the suppliers, factories, trade unions and NGOs in these countries to make sure wages for the orders we have cancelled are paid to the workers.”

Rosey Hurst, founder and director of UK business management consultancy Impactt, which specialises in ethical trade, adds: “These are unprecedented times which call for unprecedented action. We are absolutely delighted to see Primark putting its shoulder to the wheel of reducing impacts of Covid-19 on the most vulnerable in its supply chains. 

“This move will enable Primark and its suppliers, working together, to make a significant contribution towards supporting workers as we all weather this global storm together.”