Fast fashion and the legacy of a pandemic

  • Written By: Kate Capocci
  • Published: Wed, 03 Mar 2021 09:00 GMT

2020 proved devastating for countless communities, industries and nations. The fashion retail sector has been hit hard, facing store closures and a drop in customers as more and more people were plunged into economic uncertainty. Notable casualties have included Oasis, Warehouse, TM Lewin, Edinburgh Woollen Mill, M&Co, Peacocks, Jaeger and, of course, Arcadia, owner of the Topshop brand. The Centre for Retail Research has estimated that UK retail administrations this year will have affected over 95,000 employees.

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Some of these brands may be saved in one form or another: Boohoo Group has already bought Oasis, Warehouse and Debenhams while Asos has bought a number of brands from Arcadia, including Topshop and Miss Selfridge. However, it is not just the pandemic that is hurting the sector. It is also facing a profound structural shift in the move to online, plus significant environmental and social challenges.

Environmental impact

In the short-term policymakers’ attention has been focused on the pandemic, but it is clear that climate action is likely to form a significant part of the recovery strategy. Governments around the world have already earmarked a significant proportion of their fiscal recovery packages to tackle carbon emissions and climate change.

The fashion industry is in the firing line. It is responsible for 10% of annual global carbon emissions, with global consumption of apparel at 62 million metric tons in 20191. The UN Environment Programme (UNEP) has calculated that it takes an average of 3,781 litres of water to make one pair of jeans. Putting that in context, if the average person drinks 3 litres of water a day, one pair of jeans is equivalent a person’s water intake over nearly three and a half years. This is before we even begin to consider the environmental impacts from the eventual disposal of the apparel (whether from incineration or landfill) or the microplastics found in man-made fibres.
Though this area of retail has managed to escape public backlash for a lot longer than many other industries (energy companies and airlines for example), awareness of the negative impacts of fast fashion is starting to alter the way we consume. According to data from eBay, in June 2020 second-hand sales increased 1,211% from the same period in 20182 and more than half of 25-to-34-year-olds now buy second-hand clothes3.

That said, it would be a step too far to conclude that the bankruptcies on the high-street are caused primarily by a consumer shift towards sustainability. One of the key drivers has been the shift to online shopping, a shift for which newer companies like ASOS and Boohoo have been perfectly positioned. Established brand names have divided into those who could navigate the change (Next) and those that could not (Debenhams).
To our mind, this illustrates the importance of being able to navigate shifts in our patterns of consumption. Although we are unlikely to do without new apparel entirely, we are likely to see a huge shift in the landscape of the industry. Retailers may be forced to rethink their mass production of poor-quality items before long.

Social impact

Let’s not forget that the fashion industry has a social cost as well. In the UK there have been scandals from Boohoo and Sports Direct on worker exploitation, with dangerous work conditions and low pay. This is more shocking for being in one of the world’s wealthiest countries though tales of exploitation are replicated across the world.

This is illustrated by the Rana Plaza incident in Bangladesh in 2013. Rana Plaza was an eight-storey commercial building that included five garment factories producing clothing for large brands such as Primark, Matalan and Benetton. On 23 April 2013 structural cracks appeared on the lower floors of the building, leading to the businesses on the ground floor (shops and a bank) to be evacuated. The next day, garment workers were told to return to their posts in the factories. Within hours, the building collapsed4 and 1,134 people lost their lives.

These garment workers were paid the minimum wage, only a third of the estimated living wage. Judy Gearhart, the executive director of the International Labour Rights Forum has since added “Managers hit workers with sticks to force them into the factory that day.”5

In the years following there has been hard campaigning to improve working conditions, health & safety requirements, and the minimum wage. Progress has unquestionably been made, but there is now another potential controversy threatening fashion retail brands: Uighur forced labour.

There is growing global condemnation of the human rights abuses taking place in Western China, where it is thought that more than a million people from Chinese minority groups (most notably, Uighur Muslims) are detained for “re-education”. There have been numerous alleged abuses and most recently, there has been new evidence that more than half a million of these detainees are being forced to work in seasonal cotton picking6. 20% of the world’s cotton is sourced from Xinjiang.
As such, it is plausible that many mainstream brands will have used cotton in their products that was harvested from forced labour. The complexity of supply chains means that it is unlikely that many fashion retail companies would know that they are complicit in the practice. This brings serious reputational and litigation risks.
It should be said, neither the price or ‘quality’ of a brand, nor the quantity of items manufactured and sold is able to indicate if the materials were sourced responsibly or if the factory workers have been well treated and properly paid. Fast fashion and luxury retailers alike have been found wanting.


From an investment point of view, this makes retail a tricky sector. Long-term structural changes are underway and the ways we buy clothes are beginning to change. While there are structural tailwinds for online retailers, these same companies are facing enormous sustainability headwinds. Apparel remains one of the most carbon intensive industries in the world and has a poor reputation when it comes to the treatment of their workforce through the entire supply-chain.
Companies need to be on the right side of the move to ecommerce and to be running their businesses sustainably. There will be winners, but in the meantime, it is a sector that needs to be approached with caution.






By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Risk warning
Investment does involve risk. The value of investments and the income from them can go down as well as up. The investor may not receive back, in total, the original amount invested. Past performance is not a guide to future performance. Rates of tax are those prevailing at the time and are subject to change without notice. Clients should always seek appropriate advice from their financial adviser before committing funds for investment. When investments are made in overseas securities, movements in exchange rates may have an effect on the value of that investment. The effect may be favourable or unfavourable.

Smith & Williamson Investment Management LLP
Authorised and regulated by the Financial Conduct Authority.
Registered in England No. OC 369632. FRN: 580531
Smith & Williamson Investment Management LLP is part of the Tilney Smith & Williamson group.
© Tilney Smith & Williamson Limited 2021

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Kate Capocci

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Investment management - Private client
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