CMA to probe soaring prices in funeral market

The UK's competition watchdog will carry out an in-depth probe into the funeral services market after finding that the price of a funeral has increased at twice the rate of inflation each year for the past 14 years.

The Competitions & Markets Authority said on Thursday that it was "concerned about the effectiveness of competition in the funerals sector" and the vast majority of responses to its initial consultation were supportive of a proposal for a full market investigation on the supply of services by funeral directors and the supply of crematoria services.

Noting the average price of a funeral was a "significant outlay" of £4,300 before including flowers and catering, the CMA noted that it was "difficult for people to compare" between providers as many funeral directors showed "reluctance" to publish or disclose clear prices or to provide detailed information on quality and range.

The CMA was also concerned about vulnerability families being taken advantage of, as many people when organising a funeral may not feel in a position to look at a range of choices, which "appears to have made it easier for some funeral directors to charge high prices".

Widening the investigation into the role of local authorities, the CMA is also concerned about low numbers of crematoria providers in local areas, and the difficulty for new companies to enter the market due to the planning regime and high fixed costs, with some local authorities also implementing large increases in fees for crematoria services in recent years.

High prices of crematoria services are another concern, with the largest private operators having implemented average price rises of between 6% and 8% each year for the past eight years.

Alongside the market study, in conjunction with Age UK and the Money Advice Service, the CMA produced advice for those who need to arrange a funeral, so that some additional support is available to people immediately.

Dignity, the listed funeral services operator that has seen its shares fall more than 70% since the start of 2017 amid rising competition from low-cost providers, said it had "engaged constructively with the CMA since the market study was announced in June 2018 and has made public its support for such an investigation, believing it could help improve standards across the sector and deliver better outcomes for customers".

It pledged to continue to work with the CMA throughout the investigation and make further announcements as appropriate.

Analysts at Peel Hunt said pricing was the key issue, as well as price visibility and customer choice at a time of distress.

Peel Hunt noted that the CMA also looked at including burials and pre-paid plans, but felt burials should not be included in the scope of the probe as cemeteries in aggregate lose money.

Noting that the CMA has expanded the proposed terms of reference to include the services supplied by funeral directors at the point of need from the redemption of pre-paid funeral plans, with the Treasury retain control of its review of marketing and sale of plans, with the CMA looking at their use at point of need.

Broker Panmure Gordon, which has a 900p target price and a 'buy' rating for Dignity, said a full CMA review was "already in the price".

"It will take around 18 months so we will not know full financial impact until then. Will hold shares back. They will likely push for increased transparency in pricing, much of which Dignity have already done."