(last updated July 2019)
What has been happening in the funeral service industry
One of the biggest issues faced by the funeral service industry in recent years has been the growth of specialist funeral prepayment schemes, and - at least initially - controversy surrounding the fact that some of these offered relatively little financial security for the plan holder.
The government decided to act by bringing in legislation to cover prepayment plans. The Financial Services and Markets Act requires that pre-payment plan providers either register with the Financial Conduct Authority (FCA) or meet the special criteria for exemption. In practice, all schemes now meet the exemption criteria - most are regulated voluntarily by the Funeral Planning Authority. Prepayment plans have become quite a popular way of making financial arrangements for a funeral and the market continues to grow steadily.
Consumers have become smarter in recent years. They are now more likely to shop around, ask questions about pricing and to dispute an invoice if they feel it is unfair. Over the years the industry has repeatedly attracted criticism over allegations of unclear pricing, lack of transparency and in some cases sharp practice. Some still feel that the industry as a whole needs to do more to clean up its act and provide clear and fair pricing.
In the mid 1990s the American funeral giant Service Corporation International (SCI) moved into the UK by taking over two of the largest existing funeral companies. It then proceeded to expand by buying up many small independent businesses, eventually reaching a total of well over 700 funeral homes nation-wide. SCI trades under the name Dignity in the UK. Dignity and Co-operative Funeralcare together control around a third of the market. About 70% of funeral service businesses are independently owned.
Cremation has steadily gained in popularity in the UK as land for burial has become more expensive and scarce. It now accounts for more than 70% of all disposals. However, a fairly recent trend has seen the growing popularity of 'ethical' and 'green' funerals, particularly woodland burials using a simple biodegradable casket.
People are slowly becoming more imaginative and inventive when it comes to planning funerals. More and more people go for unusual things like custom made non-standard coffins, and unconventional personalised funeral services. Some prefer to take control of things themselves and only want professional help with the practical essentials like disposal of the body. Basic body disposal services and 'direct cremation' are now offered by some funeral directors and other specialist businesses.
A funeral director's costs are the largest part of the cost of a funeral, on average amounting to just over 70% of the cost of cremation and a little under 60% of the cost of a burial. Fees increased by 5% from 2014 to 2015 and previous years also saw above inflation increases. In the five years to 2016 the average funeral cost was £3,600. The average cost rose again in 2017, with the cheapest costing:
- £1,600 for a direct cremation, including collecting the body, a simple coffin and returning the ashes
- £3,311 for a cremation using a funeral director, including collecting the body, a basic coffin, a hearse and managing a simple (but not elaborate) ceremony
- £4,257 for a burial using a funeral director, including collecting the body, a basic coffin, a hearse and managing a simple (but not elaborate) ceremony
There are indications that increased competition and consumer resistance mean that the expected continual increase in costs may not materialise. The Co-op started cutting costs in 2016 and Dignity, one of the largest undertakers in the UK, had to cut its costs by 25% in 2018, reducing the cost of a simple funeral in England and Wales to £1,995 (£1,695 in Scotland) and freezing the cost of its more expensive full funeral at £3,800. Direct cremations are becoming increasingly popular as household budgets have come under strain and consumers have started shopping around for the best deal.
Profitability is affected by the number of deaths each year and these have been falling over many years. There was an unexpected increase in the number of deaths in 2015, thought to be because of the ineffective flu jab developed for the winter of 2014/15. The number of deaths in England and Wales in 2016 (525,048), was lower than in 2015 (529,655) but nevertheless high compared with earlier years. Deaths in 2017 increased to 533,125 and in the first seven weeks of 2018 over 10,000 more people died in England and Wales than normal for the time of year. The increased death rate and reduced life expectancy is attributed by some commentators to the government's austerity measures.
Funeral costs have been pushed up in recent years by:
- reductions in Local Authority spending
- increases in cremation and burial fees
- a shortage of burial plots
- the prices charged by privately owned crematoria
To cope with the increased costs and the effects of the recent economic downturn, people have been cutting back on what they spend on things like limousines, flowers and the cost of the venue. Many funeral directors have also been offering direct cremations as a cheaper alternative.
One major problem for the industry has been the lack of any recent increase in the maximum payment for funeral fees available from the Department for Work and Pensions (DWP). These means-tested payments are available to people on low incomes, but most funeral directors complain that they are nowhere near enough - and that they often take too long to process. The DWP funeral payment system has also been widely criticised for requiring claimants to produce a full invoice for the funeral in support of their claim.
Keeping up to date with developments
Trade associations can help you to keep up to date with developments in the sector. Associations for funeral directors include the National Association of Funeral Directors (NAFD) and the Society of Allied and Independent Funeral Directors (SAIF). Visit their websites for more information.
Trade journals such as the monthly Funeral Service Journal (FSJ) are another good source of information. Visit the FSJ website to find out more.
