The UK government in late March issued its own statement reporting on its efforts to prevent Modern Slavery in its supply chains. It is the first government in the world to do so. The statement was scarcely reported because of the distractions of the COVID-19 pandemic. However, it represents an important affirmation of UK government policy with implications for both local and international business.
The UK Modern Slavery Act (2015) requires all companies operating in the UK that have annual turnovers of at least GBP36m (USD 44m) to publish an annual statement explaining what they are doing to prevent offences such as human trafficking and forced labour in their supply chains. In its current form, the Act does not apply to government agencies. However, in the foreword to the statement, UK Prime Minister Boris Johnson explained that the government had chosen to issue it in the hope of setting an example to governments and businesses around the world.
In accordance with international best practice, the government has undertaken an assessment to identify the sectors where the supply chain risks are greatest, and where it has the most leverage. It spends some GBP 50bn (USD 62bn) on goods and services each year. Around 90% of its “tier one” suppliers are based in the UK but these companies often have complex international supply chains.
The assessment identified three key sectors as presenting the highest levels of risk:
- Information, Computers, and Technology (“ICT”) accounts for GBP 6.5bn (USD 8bn) in government expenditure each year. International supply chains are particularly complex because of the multiple levels of sub-contracting for raw material extraction, manufacturing, assembly and logistics. The Crown Commercial Service (CCS), which provides commercial services for the public sector, is taking steps to improve visibility of the ICT chain by mapping purchases of the top 200 products, covering 58 manufacturers, down to factory level.
- Construction accounts for GBP 4.2bn (USD 5.2bn) each year, and construction workers are known to be vulnerable to exploitation, partly because of the industry’s extensive reliance on low-skilled migrant labour. The government is piloting new ways of identifying modern slavery in construction projects.
- The government spends GBP 1bn (USD 1.2bn) a year on service staff, for example cleaners, drivers and caterers. The business model of these service providers often includes an emphasis on low-cost procurement and a reliance on low-skilled temporary labour. The government is now running a pilot to embed modern slavery considerations at each stage of the commercial cycle.
The risk assessment has been used to define a set of goals and key performance indicators (KPIs) for each of the government’s 24 ministerial departments who will be required to issue their own modern slavery statements for the financial year 2020-21. Each department will be expected to appoint an anti-slavery advocate at director level. Their tasks will include mapping their department’s “tier 2” supply chains in greater detail.
A warning to private sector suppliers
The late March statement includes a clear warning to suppliers whose own compliance procedures fall short. Companies who fail to meet their legal obligations will face an increased likelihood of being excluded from public contracts. The Home Office is now conducting a compliance audit and may “name and shame” companies that do not take steps to become compliant.
At the same time, the CCS is working with the University of Liverpool and the Ethical Trading Initiative (a leading UK-based NGO) to review the annual modern slavery statements of the CCS’s top suppliers with a view to raising standards.
In a separate but related development, government statistics published in early April highlight both the scale of modern slavery in the UK and its international nature. In 2019, the police, government agencies and NGOs reported 10,627 suspected Modern Slavery cases to the National Referral Mechanism (NRM), a reporting structure managed by the Home Office (interior ministry). This represents a 52% increase over 2018, and the steady growth in the number of cases almost certainly reflects heightened awareness of the problem. Only 27% of the reported cases involved UK nationals.