The Economics of the Royal Family

More interesting than the book

With nothing else going on in the country, the UK media have had space across the last couple of weeks for some coverage of the Royal Family.

With the release of Harry's book, it's been hard to avoid, and I found myself thinking more about the Royal Family this past two weeks than I would normally. 

Firstly, the sheer number of people getting so emotional about it all was wild to me. But more interestingly, I found myself down a rabbit hole looking at the finances of the Royal Family.

There is debate as to whether the Royal Family are a net positive to the country. Much of that debate comes back to whether they are economically beneficial or an unnecessary drain on taxpayers' money.

Whilst a lot of the details of the financial arrangements of the Royal Family are complex and opaque, lots of the details are made public. Let's break it down.

The Royal Family are clearly mega-rich. How do they make money?

First, let's look at the direct sources of income, which include income from personal estates, the Duchy of Lancaster, and the Sovereign Grant.

The family's personal estate, including Sandringham and Balmoral Castle, is held in trust and is part of the royal family's significant collection of assets that have been in the family for centuries. The income from these assets is used mainly to meet the private expenses of the Royal family. 

The Duchy of Lancaster is a portfolio of land, property, and assets held in trust for the reigning Monarch. The Duchy consists of land, property and assets across 45,500 acres around Yorkshire and Lancashire. Its sole purpose is to provide an additional income for the personal expenses of the reigning Monarch. 

But, the most interesting arrangement is that of The Crown Estate and The Sovereign Grant.

What is the Crown Estate and the Sovereign Grant?

The Crown Estate is a further collection of lands and assets, with a current valuation of around £7.6bn. It includes Windsor Great Park, beef farms in Scotland, everything on Regent St. in London and lots more. It generates revenue through the rental and sale of its properties and the use of its natural resources. 

The Crown Estate is not actually the Royal family's property and is managed by an independent public body, which employs 460 people. The value generated is returned to the government via the treasury. In 2022, the value generated and returned to the government was £313m.

However - under an agreement dating back to 1760 - the government then provides a % of this money back to the Royals. 

Known as the Sovereign Grant, a percentage of the profits of the Crown Estate is paid to the royal family to "cover the costs of their official duties and the maintenance of palaces and other properties". In 2021, the Sovereign Grant was set at 25% of the Crown Estate's profits, with a payout of £87.5m. It could be argued (and is) that this is a direct cost to the taxpayer. Moreover, it's a cost that's grown significantly in recent years (the grant increased in 2019 from 15% to 25% to cover refurbishments to Buckingham palace).

To summarise, the Royal family have significant revenue-generating personal assets (more on those below). They also take a quarter of the revenue generated by another load of assets they don't technically own. Alright for some.

What about all their intangible contributions?

It's not fair to talk about the economics of the Royal Family without talking about the intangible financial value they add to the country, including through tourism.

This is a topic of debate and a number impossible to calculate, but Brand Finance - a brand valuation consultancy - tried. In 2017 they put together a report attempting to value the Royal Family brand and the subsequent value created for the UK.

Whilst much of the report is, let's say, "challengeable", they estimated the monarchy's annual contribution to the UK economy in 2017 was.... £1.8bn.

The report estimates that around £550m is generated in tourism income. With around 3m visitors to Buckingham Palace, Windsor Castle and other Royal attractions annually, there is little doubt that they create interest and sell tickets and merchandise. However, this number does seem inflated. The direct contribution through ticket sales to Royal attractions in 2019 was less than £50m, and sales in gift shops were less than £20m.

Alongside tourism and the surplus provided by the Crown Estate (not actually owned by the Royals) - the report also attributes £200m from "informal endorsements". These include Kate's "Midas touch, and extra sales from fashion brands that she and the royal children are seen wearing" (a direct quote from the report, and the exact point at which I stopped reading it).

So, it seems fair to say the number is considerably less than the £1.8bn figure but probably more than the £87.5m they are paid by the British taxpayer each year. It appears the Royal family are destined to split opinion, even when it comes to cold hard numbers.

Finally - some impressive things the Royal Family own:

Whatever your opinion of the Royals, there is no debate that their collection of homes, assets and other properties is unique and a significant contributor to traditional British culture. 

Here are ten of the most interesting things the Royals can lay claim to:

1 - Regent Street - located in the heart of The West End, Regent Street is one of the world's most famous roads. As it's part of the Crown Estate, the Royals can technically lay claim to an Apple store, Nike Town and a Nando's. 

2 - The Seabed - again, through the crown estate, the royals technically own the entire UK seabed, from the coast to 12 miles out. That means they can also lay claim to Thanet Offshore Wind Farm, once the world's largest wind farm.

3 - The Crown Jewels - including the world's largest clear-cut diamond. The crown jewels are a collection of around 23,000 stones, protected in the Tower of London. Included in the collection is the world's largest clear-cut diamond - "the great star of Africa" - estimated to be worth over $2bn.

 4 - All of the Swans - This one seems like the biggest hassle of the lot to me. Still, the Royals technically own all of the swans on the River Thames and its surrounding tributaries.

5 - All of the Dolphins - If the swans weren't enough, a statute from 1324 states that “The king shall have the wreck of the sea throughout the realm, whales and sturgeons taken in the sea or elsewhere within the realm..."

6 - A Stamp Collection worth over £100m - Known as the Royal Philatelic Collection, the Royals stamp collection is £100m worth of historic UK and Commonwealth stamps dating back to 1864.

7 - A Priceless Art Collection - The Royal collection contains over 1 million art pieces, including paintings by Rembrandt, Michelangelo and Leonardo da Vinci. Apparently, there is a complete digital art inventory, but the details have never been fully revealed. 

8 - A Royal Air Force - The royal family owns a number of aircraft, including helicopters and planes, which are used for official travel and ceremonial purposes. One of the planes is an Airbus A330 - a wide-bodied passenger aircraft.

9 - A Successful Collection of Racehorses - Queen Elizabeth was a huge fan of horses. Her racehorses have won the Ascot Gold Cup, 1000 Guineas and Prix de Diane, among numerous others. According to reports, King Charles is having none of it and is preparing to sell the horses he inherited.

10 - A Mcdonald's Drive-Thru - If any of the Royals fancy a late-night Big Mac, they're in luck, as they technically own a drive-thru. The Queen reportedly purchased the Bath Road Retail Park in Slough in 2008 for £92m, where the Maccies is found. 

Charles waits patiently for his McChicken sandwich.