By Helen Reid

LONDON (Reuters) – Britain's financial regulator is taking longer than usual to approve fast-fashion retailer Shein's IPO due to supply chain oversight checks and legal risk assessments following a challenge from an advocacy group for China's Uyghur population.

The Independent Anti-Slavery Commissioner expressed concerns about Shein’s labor practices, which have allegedly involved unethical supplier conditions.

Headquartered in Singapore, Shein sells affordable fashion in 150 markets worldwide and filed confidentially with the Financial Conduct Authority (FCA) for a London listing in early June.

Awaiting approval from China's securities regulator, sources believe it will occur after the FCA’s decision. Advocacy group Stop Uyghur Genocide (SUG) submitted evidence to the FCA claiming Shein uses cotton from Xinjiang, a region accused of human rights violations by the U.S. and NGOs.

Shein maintains a zero-tolerance policy on forced labor, and a spokesperson emphasized the company’s commitment to human rights. Recently, Shein formed a global external ESG advisory board to improve governance.

In its August sustainability report, Shein reported two child labor cases but no forced labor instances in its supply chain, utilizing Oritain for cotton origin verification. The FCA, yet to comment on the listing's delay, assesses IPO timelines on a case-by-case basis.

As regulations from the EU on forced labor and the U.S. Uyghur Forced Labor Prevention Act come into force, scrutiny of Shein’s practices intensifies, with the Independent Anti-Slavery Commissioner warning that approving the IPO may signal endorsement of poor labor standards.

Pressure mounts from the new Labour government to end the IPO drought, with Finance Minister Rachel Reeves emphasizing support for innovative firms while maintaining a focus on growth. The FCA must ensure compliance with governance and disclosure, especially considering potential judicial reviews from SUG.

In a previous case, a judicial review request for another IPO faced rejection, leading some lawyers to believe a similar attempt by SUG may also fail. Shein, valued at $66 billion, faces crucial IPO performance questions based on how the FCA outlines risks in its prospectus, as exploitation issues persist across global supply chains. Shein's revenues are projected to reach $50 billion this year, a 55% increase from 2023 according to Coresight Research.