'Reputation risk' | The 'flip side' to Primark's £121m furlough cash return

The 'flip side' to Primark's £121m furlough cash return

Over the past week, fast fashion retailer Primark has hit headlines after the firm’s owner Associated British Foods (ABF) announced it would repay £121million in furlough money claimed under government retention schemes.

It’s a move that will likely be favourably received, as the retailer revealed that it had made the decision to make the repayments despite a slump in profits as a result of store closures amid the Government-imposed lockdown period.

Dominic McGregor, Founder & COO Social Chain, praised Primark for this decision. He wrote on LinkedIn: “This is exemplary behaviour from Primark and they set the benchmark high for other companies who might be in a similar position. Amazing to see.”

While this move will help to build a positive reputation for the brand – a notion supported by Chris Leadley, Marketing Manager at Forbes Burton, who previously told HR Grapevine that it “will certainly generate an immediate amount of goodwill with their customers” – others have suggested that there is a “flip-side” to this decision.

The ‘flip side’ to Primark’s move

Speaking to HR Grapevine, Jessica Lovell, Partner at reputation management law firm Slateford, shared that while this strategic move from Primark will help to avoid any scrutiny or backlash as it’s reducing any “reputation risk” by making the repayments, it raised questions over how the business has managed to do so, so quickly.

“Primark in repaying this sum is therefore reducing the scrutiny that it may face in the future having received taxpayer money – however this isn’t a fool-proof plan – Primark is used to scrutiny, holding the market position that it does,” Lovell explained.

“On the flip side, it appears that its fast fashion brand has been able to pay back these funds quickly – there is a possibility there will be questions surrounding its practices that allowed it to do so, and before many other more sustainable brands.”

Criticisms of fast fashion

Fast fashion is a term used to describe a highly profitable business model that replicates high fashion designs; however this quick turnaround of goods has been heavily criticised. Many businesses working by this model have been accused of not paying fair wages, operating sweatshops and not working in a sustainable manner.  

In 2017, Primark was no stranger to accusations such as these, after it was among 260 employers accused of “cheating workers” by failing to pay the legal minimum wage. According to the Business & Human Rights Resource Centre, Primark was found to have underpaid staff after it deducted money from their salaries to pay for uniforms.

Therefore, Primark’s ability to repay such a huge sum to the Government raises some questions on how it was able to so, as Lovell alluded to.

Furlough backlash

Since the Government rolled out is furlough scheme, the Coronavirus Job Retention Scheme (CJRS), many businesses have relied on its support to retain staff. But this has also led to a raft in criticism over the decisions that employers made throughout the past year.

Lovell continued: “As predicted it has led to a raft of criticism levelled against many decisions companies have made in the last year – amongst the backdrop that it is in the public interest to discuss these issues if they have relied on public funds.”

She also pointed out that many businesses also haven’t paid back their COVID-19 support funds, but have instead offered bonuses to some of their executives, a move that may also be condemned in the coming weeks.

Lovell concluded: “We have seen countless criticisms of other companies in recent weeks such as Foxtons and Domino’s who haven’t paid back their [COVID-19] support funds but nevertheless have paid bonuses to their executives.”

Have you enjoyed this piece?

Subscribe now to myGrapevine+ and get access to exclusive new content, and the full content archive.

Be the first to comment.

You are currently previewing this article.

This is the last preview available to you for 30 days.

To access more news, features, columns and opinions every day, create a free myGrapevine account.