The average cost of a simple burial has soared by more than £1,250 since 2000, according to a survey commissioned by American Life, the American insurer.

Burials now cost an average £3,307 compared with £2,048 in 2000. The shortage of burial plots in cemeteries and the array of expensive coffins now on offer are two main factors behind the 61 per cent increase.

Cremations remain the cheaper option, although prices have also risen by 61 per cent to an average £1,954 over the same period, the survey of 100 funeral directors showed.

With the rising costs of dying, the British funeral industry, which is worth around £1 billion annually, could even become an attractive option for investors.

This is particularly true given that people have been dying in the UK at a stable rate of around 600,000 each year since 1950, with little sign of a medical miracle on the horizon that could significantly alter this rate.

Dignity, the largest single provider of funeral-related services in the UK, floated on the London Stock Exchange in April 2004. Since then its shares have risen steadily from their debut price of 230p to 448p in afternoon trading today.

Dignity was formed in 1994 when SCI, the US group that conducted the funeral of Elvis Presley, bought and merged Plantsbrook Group and Great Southern Group, a British funeral company.

The company, which organised the burial of the Kray brothers, is continuing to expand in the UK by acquiring smaller, family-run funeral directors, which could provide opportunities for synergies, through the sharing of vehicles for example.

At its annual general meeting last year, the firm forecast a 20 per cent increase in pre-arranged funeral services. An advantage of pre-arranging is that it can save people money if costs rise by the time of death, as the American Life survey shows has happened in recent years. But this is only the case if the pre-arranged service covers future price rises, many do not.

American Life’s 2006 Survey of Funeral Costs, which is based on quotes given by 100 funeral directors across Britain, discovered that a shortage of burial plots has pushed up overall prices in and around some urban areas.

Researchers were quoted as much as £6,140 for a burial in London’s Southgate, compared with the cheapest at £1,797 in Manchester. The most expensive cremation price given was £3,200 by a funeral director in Luton compared with the cheapest at £1,371 in Ipswich.

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