Boohoo, which has its main distribution centre in Burnley, has said it will investigate claims that one of its suppliers has been paying staff well below the minimum wage and breached coronavirus guidelines.

The fast-fashion retailer told investors on Monday that it will end relationships with any supplier it finds to have broken its code of conduct.

An undercover reporter for the Sunday Times revealed the fashion firm was buying items created by staff at Jaswal Fashions, who were being paid just £3.50 an hour.

The clothing was then sent to the Boohoo Group company Nasty Gal – which also has offices in Burnley – ready for distribution to customers.

A Boohoo spokesperson said: "We will not hesitate to immediately terminate relationships with any supplier who is found not to be acting within both the letter and spirit of our supplier code of conduct.

"This includes very clear expectations on transparency about second tier suppliers."

It said it was "very grateful" for the report for highlighting the alleged conditions at the factory, saying these were "totally unacceptable and fall woefully short of any standards acceptable in any workplace".

Nasty Gal said the company would investigate the claims but said the factory are not a "direct supplier".

It said: "Nasty Gal does not allow any of its suppliers to pay less than the minimum wage and has a zero-tolerance approach to incidences of modern slavery.

"We have terminated relationships with suppliers where evidence of noncompliance with our strict code of conduct is found.

"We will take immediate steps to fully investigate the allegations raised and if the allegations are substantiated we will ensure that our suppliers immediately cease working with Jaswal Fashions."

The report has prompted an investigation by the National Crime Agency (NCA) as well as widespread anger from government officials.

An NCA spokesperson said: "Within the last few days NCA officers, along with Leicestershire Police and other partner agencies, attended a number of business premises in Leicester area to assess concerns of modern slavery and human trafficking."

The allegations have been met with widespread anger from the Government – Home Secretary Priti Patel labelled the findings “appalling” and Health Secretary Matt Hancock said yesterday he has "quite significant concerns" about employment practices at clothing factories in Leicester generally, following outbreaks at several businesses.

He warned that "very significant fines" could be handed out, or businesses shut down, if employment laws and Government workplace safety guidance were found to have been breached.

As shares in Boohoo sank this morning, market analysts at Liberum said they believe the response from Boohoo "does not go far enough".

The brokerage said: "The statement only really speaks of investigating the particular factory in question and raises the question of how many other breaches management is potentially unaware of.

"The rest of the statement speaks of procedures and checks that management has already put in place, which if the allegations are true, have clearly not been robust enough to stop significant breaches happening.

"With an investigation requested by the Home Secretary into the matter, we think Boohoo had an opportunity to show leadership and get ahead of these allegations, and this statement will do little to convince stakeholders."