A price war in the funeral business has forced one of the UK’s biggest undertakers to slash the cost of its cheapest funeral by 25%.
On Friday almost £500m was wiped off the market value of Dignity, the UK’s only publicly listed funeral services company, after it warned that increasingly tough competition in the budget end of the market would have a dramatic effect on the firm’s profitability in the future.
Dignity’s hand was forced by the Co-op, which started cutting its prices in 2016. The move by its larger rival hit Dignity’s sales and its 800 funeral homes suffered a near 7% drop in trade last year.
The chief executive of Dignity, Mike McCollum, said the company usually relied on repeat business from families or personal recommendations, but with household budgets under strain hard-up Britons were shopping around for the best deal.
“There is a growing part of the market that is price sensitive,” said McCollum. “People are going online or phoning around for a quote.”
More than a decade of price rises means many families are struggling to afford the send off they want for their loved one. In 2017 the average cost of a basic funeral increased by 4.7% to £4,078, according to a SunLife report called Cost of Dying. It was the 14th year in a row prices had risen, with analysts pointing to examples of families using crowdfunding to cope with the cost of unexpected death.
The SunLife report said one in nine families struggled with funeral costs and tried to make savings by buying a cheaper coffin, fewer flowers and in some cases not using a hearse.
To win more business, Dignity has cut the price of its so called “simple” funeral by 25% to £1,995 in England and Wales and £1,695 in Scotland. It has also frozen the price of its more expensive full-service funerals – which account for 60% of its business – at £3,800.
The simple option includes a basic coffin whereas the more expensive plan includes the option to upgrade the casket, limousine hire and access to the chapel of rest outside normal office hours.
McCollum said the simple funeral package had not been altered: “It’s a straight price cut.”
He said the competition Dignity faced had intensified in price terms and in the number of rivals operating in the market over a period when the UK death rate was declining. There are 6,000 funeral locations in the UK today compared with 4,500 when the company listed on the stock exchange in 2004.
McCollum said: “The funeral business is completely unregulated … anyone can be a funeral director. From an industry point of view the costs are fixed.
“Our staff need to be on call 24 hours a day and as deaths decline the cost per funeral has gone up, which has subsequently led to an increase in funeral prices.”
The severe share price reaction reflected analysts’ predictions that the company’s profits would almost halve to £41.2m in 2018. Dignity shares closed down 49% at 975p; in 2016 they were changing hands for £28.71.
The funeral services business faces a new threat as more families opt for cheaper direct cremations, where the deceased is collected from the place of death and taken directly to the crematorium. The ashes are then returned to the bereaved, with no funeral service.
There has been a growing awareness of this no-fuss route after celebrities including David Bowie, Prince and the novelist Anita Brookner had direct cremations.
“People don’t like funerals, they find them depressing,” said Catherine Powell, the customer experience director at Pure Cremation. “It offers a way of separating the cremation from the funeral and gives people the freedom to celebrate that person’s life when and how they choose.”
Dignity, which operates 44 crematoria, started offering its version of the service in late 2016. At £1,495, it is a cheaper option for families. The cheapest option now available costs £1,095 but does not include the return of the ashes to the family. However McCollum said the direct cremations business was “small beer”.
The company said initial reported deaths for 2017 were 590,000 in Britain, and the group conducted 68,800 funerals, compared with 70,700 the previous year. It noted that the Office for National Statistics anticipated approximately 580,000 deaths in 2018.
• This article was amended on 9 February 2018 to clarify the pricing of the direct cremations offered by Dignity. The figures for reported deaths was for Britain, not the UK as we had it in an earlier version.
