Funeral charges under the competition microscope | tutor2u Economics
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Funeral charges under the competition microscope

The Competition and Markets Authority is considering a major new investigation into rampant price inflation in the costs of funerals and crematorium services.

Prices have increased by nearly two thirds over the last decade, many times higher than the increase in the consumer price index. The CMA is concerned about the lack of effective competition in what is largely an unregulated market and the opportunities for price gouging by some funeral service businesses at a time when families are at their most distressed.

More here from BBC news

According to the CMA, "Customers could save over £1,000 by looking at a range of choices in their local area. However, people organising a funeral are usually distressed and often not in a position to do this – making it easier for some funeral directors to charge higher prices. Prices are also often not available online, making it difficult to compare options.” This looks like a pretty clear cut case of market failure and worthy of investigation by the competition authorities. There is also a serious issue to do with the higher burden of funeral costs for lower income families - high price have a deep regressive effect on these households.

The average price of the basic elements of a funeral is now £4,271 (2018) and the average cremation fee is £737 (2017). Funeral director prices increased by 68% and crematoria fees rose by 84% over the most recent 10-year periods for which we have data. By comparison, inflation (CPI) increased by around 25% over this time.

The CMA reports that the funeral industry is very fragmented, but there are three sizeable firms of funeral directors: Co-op Funeralcare, Dignity plc, and Funeral Partners Limited. Dignity is listed on the UK stock market and had a turnover in excess of £300 million in 2017. Co-op has an estimated 16% share of all UK funerals and Dignity around 11%, while Funeral Partners has a share of just under 2%. Thus, the three firm concentration ratio is 29% - well below the level required to consider the market an an oligopoly.

The industry is probably best described as monopolistically competitive with a large number of smaller family firms providing differentiated services. But in local areas, monopoly power might be much greater.

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