By Simon Ostrovsky and Meirion Jones BBC Newsnight

Garments labelled "Designed in Scotland" and sold by a UK high street chain are being made by North Korean labour in Mongolian factories, the BBC's Newsnight programme has found.

Newsnight discovered that some cashmere jumpers sold by Edinburgh Woollen Mill (EWM) are made in a factory where 80 of the workers are from North Korea.

Edinburgh Woollen Mill said the labels are "factually correct" and they do not discriminate about who they employ, but there are questions about what happens to North Korean workers' wages.

Edinburgh Woollen Mill has 500 outlets around the UK which sell garments including cashmere jumpers, labelled James Pringle and "Designed in Scotland", which are produced by a company based in Mongolia called Eermel.

They are looked after by Eermel. They have a dormitory, they have food, they have showers, they have a television Former Eermel manager David Woods on conditions for the North Korean workers

The North Korean workers in the Eermel factory in Mongolia are given food and a place to sleep, but according to Eermel's export director, Bayar, their wages are paid to the North Korean government.

"We are transferring the money to the account of the light industry of North Korea," Bayar told Newsnight.

He said he did not know how much of the wages were given to the workers: "How they split - divide the salary - we don't know."

Contradictory statements

David Woods, a manager at the Eermel factory who has recently left the company, told Newsnight:

"We're very proud to be working with Edinburgh Woollen Mill, they joined us about five years ago."

Mr Woods said the North Koreans are "hard workers, they don't complain", and that "they are looked after by Eermel. They have a dormitory, they have food, they have showers, they have a television".

Read statement from Edinburgh Woollen Mill

But when Newsnight contacted Edinburgh Woollen Mill about the arrangement the company told us they had been given a different explanation of the set up by Eermel

"No funds are paid to North Korea or any North Korean agency," they said.

The statement was in stark contradiction to what Newsnight's reporters were told on the ground, which was "the North Korean government is getting money from here".

For decades North Korea has been one of the world's most secretive societies. It is one of the few countries still under nominally communist rule.

Following North Korea's nuclear test in October 2006, the United Nations Security Council imposed sanctions on Pyongyang. The "targeted" sanctions include an embargo on military and technological materials and luxury goods, as well as a set of financial sanctions.

Labelling regulations

The US State Department estimates that around 100,000 North Koreans are employed in work brigades in Russia, China and Mongolia, generating hundreds of millions of pounds a year for leader Kim Jong-il's regime.

Kim Jong-il leads North Korea's totalitarian regime

The labour brigades are usually overseen by North Korean officials who maintain similar tight controls to those faced by the workers back in their totalitarian homeland.

At the Eermel factory in Mongolia, the-then manager Mr Woods showed Newsnight factory workers, including those from North Korea, making James Pringle cashmere jumpers.

Mr Woods also showed us the finished product, ready to be sent to Scotland, complete with "Designed in Scotland" labels.

Newsnight purchased an identical jumper in one of Edinburgh Woollen Mill's stores in the Scottish capital Edinburgh.

There is no legal requirement to label clothes with their country of origin, but it is an offence to mislead customers about where a product is made.

The Trading Standards Institute told Newsnight that "on the face of it" labelling a jumper as "Designed in Scotland" and not saying where and how it had been made "could be in breach of the regulations" to protect consumers from unfair trading.

Please note: The James Pringle label used by Edinburgh Woollen Mill is not related or linked in any way with the Pringle of Scotland brand.

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