UK Sets Mandatory Due Diligence Rules for Firms Over 350 Million Pounds

The U.K. government announced Wednesday it will introduce mandatory due diligence legislation requiring companies with turnover above 350 million pounds ($471 million) to identify and address human rights abuses and labor exploitation in their operations and supply chains.

The threshold applies to global or U.K. turnover. The rules will span services across the United Kingdom and goods in Great Britain, with Northern Ireland covered by the EU Forced Labour Regulation under the Windsor Framework (the post-Brexit arrangement governing Northern Ireland's trade alignment with the EU).

Jonathan Reynolds, secretary of state for business and trade, said the regime will be "risk-based, proportionate and reflect how responsible businesses already manage risk by aligning with established international standards, including the OECD Guidelines for Responsible Business Conduct and the UN Guiding Principles on Business and Human Rights."

The government will also create powers to remove goods made with forced labor from the Great Britain market. A regulator will investigate businesses suspected of placing such goods on the market and, where due diligence obligations have not been met and forced labor is identified, direct their withdrawal.

"This will provide a clear and targeted mechanism for tackling some of the most serious abuses in global supply chains and protecting responsible businesses from unfair competition," Reynolds said.

Why is the UK acting now?

The move follows an evidence-based review of the U.K.'s responsible business conduct framework, which found current forced labor prevention fragmented and overly reliant on voluntary measures. The Modern Slavery Act 2015 was "world leading" when introduced, Reynolds said, but standards have "since moved on, leaving the U.K. out of step with G7 partners and other major trading economies."

Reynolds confirmed a "phased and proportionate approach" balancing growth commitments, administrative burden reduction and the U.K. internal market.

The announcement comes a month after 20 leading businesses — including seven major U.K. supermarkets — joined the Ethical Trading Initiative, the British Retail Consortium, B Lab U.K., trade unions and civil society groups in writing to Prime Minister Andy Burnham demanding mandatory human rights and environmental due diligence (mHREDD) legislation this parliamentary session, which ends next May. Signatories included Asos, Marks & Spencer, New Look, John Lewis Partnership and Superdry & Co.

The letter cited Fabian Society research putting the annual cost of serious labor exploitation and environmental harm at roughly 4.4 billion pounds ($5.9 billion), against an estimated 420 million pounds ($565 million) annual compliance cost — under 10 percent of the damage. It also noted government figures showing 40 percent of companies fail basic reporting requirements under Section 54 of the Modern Slavery Act, "without consequence."

What are campaigners saying?

Anti-Slavery International called the review's recommendations an "essential first step" but criticized applying the EU Forced Labour Regulation only to Northern Ireland, saying it would "perpetuate patchwork regulation, create legal divergence that harms growth and leave U.K. consumers vulnerable to products made with forced labor."

"Up to this point, voluntary efforts have not effected any change as businesses have continued to profit from the exploitation of people and planet," said Craig Bradshaw, its business and human rights manager. "A Business, Human Rights and Environment Act and a complementary import ban on goods made with forced labor must apply across the entirety of the U.K."

Labour Behind the Label said abuses must be "considered in their totality" — forced overtime, underpayment, harassment and unsafe conditions — and that due diligence must include independent trade union cooperation and confidential worker testimony collected outside the factory gate.

"We are also extremely concerned about the lack of consideration for environmental harms in today's statement," said Ellen Kettell, the group's advocacy lead, citing the 40-degree heat Bangladeshi garment workers endured this summer.

The Ethical Trading Initiative warned the legislation's success will "depend on the detail," pressing for environmental harms in scope, a clear timetable this session, full value chain coverage including companies' own purchasing practices, and regulator sanctions that "drive improvement and a route to remedy."

What does this mean for sourcing teams?

It remains unclear whether the legislation will prompt Washington to remove the 10 percent Section 301 tariff on U.K. imports imposed over forced labor policy shortcomings. Tariffs of up to 12.5 percent tied to forced labor have pushed several countries to tighten import rules.

At a Business and Trade Committee session in July, trade minister Chris Bryant said he would be "absolutely amazed and demoralized" if the U.K. did not introduce "some form of forced labor ban" before parliament ends in August 2029. He backed due diligence requirements for company directors, with potential civil liability, "so that they would have to make sure that within their supply chain there was nothing sourced from forced labor."

For sourcing heads at large apparel and retail groups, the decision is blunt: map tier-two and beyond now, because director liability and market-withdrawal powers are coming.