Dignity under pressure from stiff competition in the funeral business

Shares in funeral provider Dignity fell 15% after the Competition and Markets Authority (CMA) launched an investigation into the sector.

Dignity is the UK’s largest provider, owning more than 500 funeral directors and operating 22 crematoriums.

Its share price has taken a battering in the last year and Friday’s close of 1050p was nearly 60% below its value in November.

Daniel Gordon, Senior Director of Markets at the CMA, said: “People can understandably be very emotionally vulnerable when planning a funeral. We therefore think it is important that – at what can be a particularly challenging time – the process is made as easy as possible.

“As part of this study, we want to ensure that people can at least receive clear information on prices and the services making up a funeral, and that people get a fair deal on the cremation fees charged.”

In parallel to the CMA’s market study, HM Treasury is launching a separate call for evidence on regulation in the pre-paid funerals sector.

Mike McCollum, chief executive of Dignity said: “We are focused on delivering excellent service to our clients in whatever way suits their personal needs and welcome today’s announcements from the Treasury and CMA.

“As part of our support for these reviews, we expect to share the work we have already collated to support the calls for regulation we have been making for some time.”

Dignity, one of the UK’s biggest undertakers, has previously warned investors that its future profitability will be at peril from cheaper competition at the basic end of the funeral business.

A report from SunLife in 2017 said the cost of an average funeral had reached over £4,000 which was the 14th consecutive  year of price rises.

The report showed that many families struggle with the costs of a funeral and some have resorted to crowd funding to pay the costs of an unexpected death.

The Co-Op started to cut its prices in 2016 and the resulting customer pressure and changes in the market compelled Dignity to follow suite.

The number of funeral providers has also increase in the same period from 4,000 to 6,000, while simultaneously the UK death rate has declined.

Dignity’s chief executive officer, Mike McCollum lamented that “as deaths decline the cost per funeral has gone up”.

Added to these challenges is a change of social practice as more people opt for direct cremation and have their loved ones taken from their place of death, straight to the crematorium, thus avoiding funeral costs altogether.

To meet these challenges Dignity has cut its ‘basic’ funeral package by 25% to £1995 and frozen the price of its more luxurious ‘full service’ funerals at £3,800.

McCollum added: “There is a growing part of the market that is price sensitive. People are going on line or phoning around for a quote. The funeral business is completely unregulated, anyone can be a funeral director. From an industry point of view the costs are fixed.”