Funerals provider Dignity (DTY) is on the back foot after the Competition and Markets Authority (CMA) said it is launching a review into the £2bn funerals market to ensure people aren’t getting a bad deal.
Shares in Dignity fell 14% to £10.43 as investors are worried about the potential risks from greater regulation.
Earlier this year, the company cut funeral prices to compete with rival Co-Op but this cut earnings forecasts significantly.
Burying your loved one can easily run into thousands of pounds, with the average cost currently £3,800 in 2017 - although extras could easily add another £2,000 to the total bill.
‘Affordability and debt can therefore be a real concern to many people, with those on the lowest incomes potentially spending up to one third of their annual income on a funeral,’ comments the CMA.
The regulatory authority will be using pricing and services information from funeral directors to decide whether it is clear enough for bereaved people to choose the best option for them.
It will also look at the factors affecting prices and how these have changed over time.
Separately the UK Treasury has its eye on pre-paid funerals after issuing a call for evidence to prevent a lack of clarity, misleading sales activity and ensure access to redress schemes if things go wrong.
AJ Bell investment director Russ Mould notes there are currently 1.3m undrawn plans in the UK and Dignity reported 450,000 outstanding plans at the end of 2017, implying regulatory action here could impact the business.
