The ‘Firm’: Surprisingly profitable
In the past week, it was revealed to us that the British Monarchy a.k.a the Royal Family, can also be referred to as ‘the firm’ or ‘the institution’. At HTMM we like to break down how companies make their money, and now that we know that the Royal Family is a firm with a questionable HR department it only makes sense that we analyse it!
The Royal Family is really good at taking things from others and playing it cool; for example, they took Meghan’s voice (silent or silenced?). Colonisation still has a long-lasting effect on the nations that were looted by the British Empire, however, their ‘loot’ is still being showcased today. The Queens owns 2 of the largest diamonds ever found, one is called ‘The Great Star of Africa’ and the second is called ‘The Second Star of Africa’; together they are worth c.£3bn. Aside from taking precious stones, they also took large amounts of land and today most of their income comes from rental income on this very land.
It’s fair to say that most people do not know much about the Royal Family outside of what the Crown has revealed to us over the last 4 seasons (even though the ‘firm’ has always argued that it’s fiction), and even less is known about the true source of their income. So, besides leaving an allegedly racist institution, what else are Meghan and Harry being cut off from?
Well, most people know that part of the Royal Family's earnings come from taxpayer money but most do not know that the Royal Family actually got the short end of the stick in this agreement.
History
The Royal family has a very long and complex history of accumulating wealth (mainly by taking it from others), but we’ll focus on their financial history and how they arrived at the current arrangement.
Throughout their extensive reign, the British Monarchy has accumulated large amounts of land and property in the UK and this land ownership forms the main source of their income. In the 1700s the UK was ruled by several kings, who coincidentally were all named ‘George’ and they enjoyed throwing lavish parties, which quickly accumulated into a sizable personal and public debt. In 1760, King George III made a deal with parliament which offered them revenue from Crown Lands for the entirety of his reign in exchange for a fixed annual salary and the cancellation of all crown debts. It is important to note that the monarchy still owns the land but they turn over the profits for a fixed salary, every other monarch since King George III has voluntarily upheld this arrangement with parliament.
Today, the crown estate is worth £13.4bn and brought in revenues of £345m in the financial year ending in March 2020, the sovereign grant paid to the Queen was £85.9m of which £34.4m must be spent on reservicing Buckingham Palace.
Notable property owned by the Crown estate:
- Regent Street
- Windsor Castle
- Half of St James’s (the half that includes Scotch)
- The entire seabed around the UK and hence plays an active part in enabling offshore wind
Income
While the Sovereign Grant is money the monarchy receives from the public, their private income mainly comes from the two royal Duchies — the Duchy of Lancaster & the Duchy of Cornwall (a Duchy is an estate owned by the duke/duchess).
The Duchies are privately managed estates that are made up of, commercial, agricultural and residential property that is leased to produce income. The Queen owns the Duchy of Lancaster while Prince Charles owns the Duchy of Cornwall, and as the latter
Facts about the Duchy of Lancaster:
- Revenue is passed to the reigning monarch — currently Queen Elizabeth II
- The estate consists of 18,000 hectares of land — for comparison that’s 29,000 football pitches
- Owns the Savoy Estate which includes — the Savoy Hotel, Somerset House, the majority of the properties on the Strand and embankment hence making KCL is one of its clients
- In 2019 the Duchy made £28m in revenue with net assets of £540m
- The portfolio also includes financial assets which brought in £3.1m in financial income and is managed by Newton Investment Management who they paid £37k (Incredible ROI)
Facts about the Duchy of Cornwall:
- Revenue is passed to the Duke of Cornwall — Currently Prince Charles
- The estate consists of 53,000 hectares of land — 85,000 football pitches or half of the area within the M25; also includes 13% of Cornwall
- In 2019 the Duchy made £37m in revenue with net assets of £933m
- Owns the Oval Cricket ground and the manor of Kennington
- £5m of the duchies income goes to paying William and (previously) Harry
Prince Charles’ private income exceeds the Queen’s every year. In the interviews and subtexts within the Crown, we often hear about the ‘most senior’ members of the Royal Family making key decisions and if we follow the money it all points back to Charles.
Expenses
While both Prince Charles’ and the Queen make money from the Duchies they pay other members of the family for carrying out Royal duties. After expenses, the Duchy of Cornwall hands over £22m to Prince Charles — c. £5m of this income goes to Prince William and (previously) Prince Harry. Likewise, the Queen pays her other children; Anne, Andrew (this guy… really?!) & Edward a salary from the Duchy of Lancaster’s income.
The Sovereign Grant from the Crown Estate is to be used to pay for royal engagements and the royal’s living expenses — here are a few ways this money has been spent:
- £38.3m — Property maintenance
- £24.4m — Payroll/fulltime staff
- £5.3m — Travel (Royal tours etc), a 10-day tour costs approximately £250k
- £2.6m — Housekeeping and hospitality
Unit Economics
When expressing discontent with the Royal Family we often hear the argument that they are obsolete and are still funded by taxpayer money. Let’s recall that the Queen willingly hands over £345m of revenue from the Crown Estate and in return receives £86m to keep body and soul together. To the UK Government, that’s a 4x Monarch Multiple! Without even needing to state the tourism argument it is clear that the Royal Family pays for itself. This agreement still does not really benefit the monarchy but we could look at it as a form of paying ‘rent’ to be allowed to be Royal?
HTMM Opinion
The Royal Family as an institution stays far away from politics, pays its own bills, and like every good company, makes efforts to ‘give back’ (philanthropy and ESG are all the rage these days). Whilst, I understand the argument that a monarchy isn’t necessary for modern society, I believe the UK’s tourism industry would struggle without the ‘Firm’.
In 2018 37.9 million people visited the UK and spent £22.9bn. Outside of London, there are very few tourist hotspots in the UK and most of the attraction to London is its perceived history and culture. People are captivated by seeing ‘real’ guards standing in front of a ‘real’ palace where a ‘real’ Queen resides. In the interview with Oprah, Harry mentioned that the UK tabloids and Royal Family have a symbiotic relationship — I think this statement can be extended to the UK tourism industry as well.
Tourism contributes to ~10% of the UK’s GDP — with other key contributing industries fleeting, the Royal Family may stand to be more important than ever in the next few years.
However, it is still important to note that the source of their wealth is almost entirely from colonisation and maybe The Firm’s way of coming to terms with this is by giving away Crown Estate revenue and endless ‘charitable’ missions?
It is yet to be seen if this debt repayment is really up to scratch.
Hot Take
Charles said it.
— by £m€m, special thanks to Kemi for her support week
