The ethical fashion brand People Tree is putting its UK business into liquidation with debts of more than £8.5m including money owed to suppliers, customers and most of its British workforce. Founded by the former wife and husband team Safia and James Minney,‎ People Tree’s celebrity following included the film star Emma Watson and the model Jo Wood. It became an influential voice in UK fashion, using organic materials and campaigning for better treatment of garment workers around the world. However, after a deterioration in trading performance, it has warned creditors that it cannot meet its debts, leaving suppliers in India out of pocket by hundreds of thousands of pounds. The company’s creditors have received a letter saying a meeting will be held on 28 September to dissolve the company, which has already made the majority of its workers redundant in recent months. The meeting will appoint liquidators from Opus Restructuring & Insolvency to wind up the business. Founded in 1991 in Tokyo as Global Village, People Tree launched in the UK in the 2000s, going on to collaborate with designers including Vivienne Westwood and Orla Kiely, while Wood, the ex-wife of the Rolling Stone Ronnie Wood, visited its producers in Nepal and Bangladesh. The brand currently continues to trade in Europe and Japan, but its future in the UK and Europe is at risk. People Tree’s European website is continuing to operate, with a note promising that shipping to the UK will begin soon, but former insiders said the European operation’s only employee was being made redundant and it was not clear how trade would be able to continue as the buying and marketing had been run from the UK. Safia Minney, who stepped back from day-to-day operations in 2015, said she was “heartbroken” about the liquidation. “I’m sorry for the producers who depended on the business for their livelihoods, investors and customers who have been let down,” she added. She hoped that the remaining parts of the business “find a way through the current difficulties and flourish in the future”. James Minney, who is currently the chief executive of People Tree in the UK and Japan, said: “I am extremely sad at this situation. Our customers and our wholesale stockists have been and always will be the absolute rock of support for People Tree. Our suppliers and creditors, with whom we have been in close discussions throughout this difficult time, have been supportive throughout our journey. “The basic mission of fair trade, whether fashion or other goods, of honouring people’s traditions, hand skills, and the love they pour into the products, and creating sustainable market access, was and is paramount, even though we cannot continue our business in UK.” Several big suppliers in India are owed more than £100,000 with one due more than £400,000, according to the letter to creditors. One source said that some were only paid about half the amount owed for this year’s autumn collection. One supplier said his company was badly affected and he knew other suppliers were “in distress”. James Minney said the group was in “ongoing discussion with our suppliers as we tried to turn the business around”. People Tree’s former UK staff, most of whom have not been paid since at least July but many of whom were not made redundant until mid-August, say they have not received money owed. At least two are understood to have been involved in a tribunal against the company in order to claim payment after being made redundant in the first few months of this year. One former member of staff said that it was “horrific” that the ethical company had not been able to pay suppliers as it had historically set “the gold standard” in ethical trade and had been instrumental in demonstrating that the fashion industry could be run differently.” “People Tree was a wonderful radical idea. It existed to prove that there was a better way to do things,” she said. Staff had continued to work for the brand even when times were tough as they were hopeful of turning things around to ensure suppliers were paid, she added. Documents relating to the liquidation seen by the Guardian show that the group’s 14 members of staff are together owed just over £243,000 – or an average of £17,000 each. It is understood that some shoppers have been waiting for refunds since June. One former member of staff said she had been forced to rely on savings to get by after being made redundant in August and waiting weeks for People Tree to declare itself insolvent so that she could apply to the redundancy payments service, a government-backed body, which facilitates assistance for those who lose their jobs when a company becomes insolvent. Safia Minney stepped away from the company in 2015, after she and her husband split up, but remains a shareholder and held a non-executive board position until July this year. James Minney remains a 50% shareholder of People Tree’s parent group and one of only two directors of the UK business. He was placed in charge of the Japanese business in 2015, and then made interim chief executive of the UK in 2021. The company owes almost £1.6m to three key creditors. The investors Shared Interest and Oikocredit, which are together owed £816,893, have their loans secured by personal guarantees by James and Safia Minney. This article was amended on 27 September 2023. A reference that “the brand’s future is now at risk” has been corrected to say that its future in the UK and Europe is now at risk. And the details of James Minney’s current and previous roles in the company have been clarified.