The Crown Estate, which finances the British monarchy, used to be a property company. Awkwardly, it is becoming a national renewable-energy champion.
By guest author Stephen Wilmot from the Wall Street Journal.
May 6, 2023
The funding of the British monarchy, never clean, is getting messier.
The transfer of ceremonial power from the late Queen Elizabeth II to her son, King Charles III, reached a climax with Saturday’s coronation in London. Behind the scenes, the company that finances the public activities of Britain’s royal family is also undergoing a radical generational change.
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The Crown Estate charts its origins back to 1066, when William the Conqueror invaded England from Normandy and claimed its land “in right of the Crown.” Almost a millennium later, its holdings have shrunk to London property last valued at GBP 7.7 billion, equivalent to USD 9.7 billion; some shopping malls and land outside of the U.K. capital; and—the part most in keeping with the company’s genesis—most of the seabed around the island.
These days, the assets belong to King Charles only in his public capacity as monarch. In practice, this means the Crown Estate gives its profit to the U.K. Treasury, which in turn hands over a semifixed cut to the royal family to carry out public duties and pay for five palaces, including Buckingham Palace and Windsor Castle. For the year through March 2022, this cut, called the Sovereign Grant, amounted to £86.3 million, based on a five-year deal agreed upon in 2016.
Another settlement between the monarch and the Treasury is now overdue. It should have taken place last year, but at the time the Crown Estate was still completing a big round of offshore wind-farm licensing deals with European energy companies including BP, TotalEnergies and RWE, so the negotiations were delayed. The wind-farm agreements were finally signed in January, bringing the Crown Estate a bonanza of monthly “option fees.” The new revenue stream of roughly £1 billion annually should last for years.
This will be transformational for a company that made just £491 million of revenue in the year through March 2022. A decade ago, the Crown Estate looked and was run like a property company: Rents from offices, shops and other urban real estate contributed about two-thirds of its revenue. The business exploiting the seabed has been growing for some years, but January’s wind-farm deals will make it the financial core of the company.
This is awkward for King Charles, for two reasons. First, under the current arrangement it would put the monarchy in line for a huge revenue increase. It could do with a raise, having spent £102.4 million in the year through March 2022, a chunk more than the Sovereign Grant, due to the timing of refurbishment projects at Buckingham Palace. But the new king felt obliged to turn it down. When the Crown Estate announced its licensing deals, he asked for the “windfall” to be “directed for wider public good” through an adjustment in the Sovereign Grant.
The second problem is harder for the monarch to address. The coastal seabed is a monopoly asset that in most countries, including the U.S., belongs to the state. It is in a very different category to the buildings the Crown Estate owns around London’s Regent Street, which sit alongside others owned by institutional investors or by British aristocrats like the Duke of Westminster. It positions the company squarely as a public asset with a strategic role to play in the U.K. government’s climate ambitions, in addition to its historic revenue-raising function.
In some ways this corporate transition seems fitting as Charles, a longtime champion of green causes, takes the crown. Yet it will also make the U.K. royal family’s sometimes controversial dependence on government funding more explicit. The Sovereign Grant may even start to be associated with household energy bills, which will ultimately have to pay for the Crown Estate’s lucrative licensing fees.
King Charles famously wants a “slimmed-down” monarchy. The first test of that will be the new Sovereign Grant, which is currently under negotiation and might be announced around the time the Crown Estate and Buckingham Palace publish annual accounts next month. But it isn’t just how much the venerable institution costs that will matter for its legitimacy under the newly crowned King. It is also where the money comes from.