Shares in Dignity fell more than six percent on the news that Co-op was cutting funeral prices to beat competitors.
Dignity cut the price of its pre-paid funeral plan by £340 two weeks ago, undercutting Co-op. On Monday, Co-op continued the price war and guaranteed to beat prices.
“The key concern post Dignity’s announcement of price reductions in January to match the Co-op on Simple funerals was that the Co-op would respond – it now has with a £100 price reduction,” said Analyst Charles Hall.
The latest Sun Life report on funeral costs has shown the average cost of a basic funeral to increase for the 15th consecutive year.
According to the report, the average basic funeral now costs £4,271.
Robert Maclachlan, the managing director of Co-op’s Funeralcare business, said the cut in costs were to tackle affordability.
“In the last two years we have seen a huge shift in the number of clients seeking affordable funeral choices,” he said.
The funeral services sector has been investigated by the Competition and Markets Authority (CMA), which launched an investigation to make sure that customers were “not getting a bad deal”.
“There is plenty of evidence that prices are too high,” said James Congdon from Quest, a division of Canaccord Genuity.
“With the backdrop of the CMA investigation into pricing, and clarity of pricing, perhaps its not a surprise that prices are coming down.”
Shares in Dignity (LON: DTY) are currently trading down 0.88 percent at 1.010,00 (1653GMT).
