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Dignity falls on CMA investigation

The funeral sector has attracted greater attention from regulators
December 3, 2018

The decision by the Competition and Markets Authority (CMA) to escalate its market study of funeral sector pricing to a full investigation sent shares in funeral provider Dignity (DTY) falling again. Dignity has had a difficult year to say the least, starting with a profit warning in January, a lacklustre set of results in March and news of the regulatory review over the summer.

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So far, management has responded positively to news of the investigation, arguing that tighter regulation would be beneficial for all operators in the sector. But the market is clearly wary about what a tighter regulatory environment could mean for groups such as Dignity. Brokerage Peel Hunt warned the language used by the CMA was “significantly more strident than expected”, and that “the spotlight is firmly on Dignity and the Co-op”, seeing as the focus is sharply on larger chains and recent price cuts.

Several years of above-inflation price hikes have caught the regulators’ attention, despite the fact the funeral market has been flooded with low-cost providers of late, intent on selling the most competitive funeral package possible. It was this race to the bottom that prompted Dignity’s start-of-the-year profit warning, which said it would cut prices for simple funeral plans by roughly 25 per cent to maintain market share. It also said it would freeze prices for traditional funerals in most locations.

But this wasn’t enough for the CMA. It still believes organising funerals costs “those on the lowest incomes nearly 40 per cent of their annual outgoings”, while evidence indicates “most people who organise a funeral remain extremely vulnerable to exploitation and future rises in charges”. The regulator also estimates funeral director prices have increased by more than 68 per cent over the last 10 years and crematoria by 84 per cent.