One of Boohoo's biggest shareholders has dumped almost all its investment in the fashion group over its response to slave sweatshop allegations.
Standard Life Aberdeen (SLA) said the company's reaction to the scandal was 'inadequate'.
Boohoo has been rocked by claims that some of its clothes were being packaged in sweatshops where staff were paid as little as £3.50 an hour.
Boohoo has been rocked by claims that some of its clothes were being packaged in sweatshops where staff were paid as little as £3.50 an hour
Clothing factories supplying the fast fashion giant have also been accused of flouting social distancing rules designed to keep workers safe.
The scandal sent shares plunging 42 per cent in just three days at the start of this week, costing founders Carol Kane and the Kamani family a total of £433million.
Bosses have launched an independent investigation led by Alison Levitt QC, a top business crime barrister, and promised to spend £10million to end 'malpractice'.
But in a sign that Boohoo has failed to win over the City, SLA sold around £75million of stock, cutting its stake from 42m shares to 15m.
Lesley Duncan, deputy head of UK equities at SLA's fund management business, said: 'Having spoken to Boohoo's management team a number of times this week, we view their response as inadequate in scope, timeliness and gravity.'
SLA, which looks after £545billion of savers' money and is the UK's largest listed asset manager, was Boohoo's fourth-largest independent shareholder.
The firm passed SLA's ethical tests in 2014 when it listed, and the Kamani family have shrugged off the allegations with one family member telling social media followers 'don't believe everything you read'.
Poor conditions in the Leicester garment industry have been an open secret for years with numerous reports raising concerns about minimum wage violations, modern slavery and poor working conditions.
Boohoo accounts for up to 80 per cent of the output from the city's 1,000 factories, according to a report published last week.
The industry is being investigated by the Health and Safety Executive and the National Crime Agency after Home Secretary Priti Patel called the revelations 'truly appalling'.
A Boohoo spokesman said they were 'disappointed' by SLA's decision, adding: 'We have been engaging extensively with our shareholders and continue to take on board their feedback.
'We believe that our actions taken this week, including our recently announced independent review, make it very clear just how determined we are to ensure that our entire supply chain adheres to our code of conduct.'
Boohoo shares fell 2.3 per cent.