Could the monarchy be the key to economic recovery in the UK?

Despite recovering since the pandemic, the UK economy has slumped of late, inflation has hit a whopping 9% and the cost-of-living crisis has worsened. So, with Queen Elizabeth II celebrating her Platinum Jubilee this week, Business Leader investigated whether Britain’s longest-enduring monarch is the key to the UK’s economic recovery.

Does the monarchy cost more money than it brings in?

The extent to which the monarchy drains or benefits the economy has been a hotly debated topic for years. Some believe the royal family attracts tourism to the UK, whilst others think it’s a drain on the taxpayer.

According to Dr. Maria Rana, an expert in economics and finance from the University of Salford Business School, the annual financial statement for the financial year 2020-21 published by the Royal Household says that the net expenditure of the Royal family increased from £69m in 2020 to £87.5m in 2021, an increase of £18.5m in the previous financial year.

The rise of net expenditure (income minus total expenditure) is mainly due to a decrease in income (decreased by £10.8m from £20.2m in 2020 to £9.4m in 2021, largely because of a significant reduction in facilities management charges, which was caused by the closure of Windsor Castle and Buckingham Palace to the public because of Covid-19 restrictions). Rana says this was also due to an increase in expenditure on property maintenance, which increased by £11.2m from £38.3m in 2020 to £49.5m in 2021, £31.6m of which was for the Reservicing of Buckingham Palace.

Dr. Rana goes on to say that the Sovereign Grant is what funds the Royal family’s official expenses and is a measure of the cost of the monarchy to the taxpayer. In 2021, the Sovereign Grant amounted to £85.9m, an increase of £3.5m compared to 2020.

Whilst the cost to the taxpayer appears to have risen of late, this is still far short of the actual cost to the taxpayer, according to some estimates. In an article published by Time, Graham Smith, the CEO of Republic, a group that advocates abolishing the monarchy, said that it costs British taxpayers about $468m (£375m) a year to have a head of state. Smith goes on to say that our monarch is one of the most expensive non-political heads of state in Europe, costing at least 12 times as much as Ireland’s elected equivalent.

However, royalists argue that the Royal family generates more than it spends. The Royal Collection Trust looks after the Royal Collection and manages the official residences of the Queen. According to its annual report of 2019/20, a record 3,285,000 people visited the official residences in 2019/20 – the highest number ever, generating £49.8m. Gift shop sales also accounted for £19.9m, bringing the yearly total income from the Royal Collection Trust to £71.5m in that period.

In 2018/19, the revenue from The Crown Estate also came in at £343.5 million, whilst a report in the Express claims that the House of Windsor, worth an estimated £19 billion, brings in hundreds of millions of pounds into Britain’s economy each year.

So, whether you think the monarchy is a drain on or a source of income for the UK economy likely depends on if you’re a royalist or not. The true figure of the monarchy’s cost perhaps lies somewhere in the middle on the royalty/republican spectrum.

What effect will the Platinum Jubilee have on the economy?

With the Platinum Jubilee taking place on Sunday, it’s also important to consider its potential effect on the UK economy.

According to the March 2021 budget, £28m of taxpayers’ money will be put into the Platinum Jubilee celebrations. Dr. Rana says that the time off work resulting from the extra bank holiday will also affect economic output.

She comments: “According to Bloomberg Economics, the extra day off on Thursday will trim a half percentage point of GDP due to lost output. Employees might also extend the four-day Jubilee weekend by taking annual leave, reducing output even further.

“The economic impact assessment published by the Government’s Department for Digital, Culture, Media and Sport clearly states that ‘if the Platinum Jubilee bank holiday weekend is considered within only one month or quarter, there is likely to be a sharp negative impact on output as the loss in output is likely to exceed the increase in spending’.

“However, based on previous Jubilees, a ‘bounce back’ effect is expected in the following months when businesses are expected to increase production to offset the loss of output and employees are likely to be more productive after spending much-needed precious time with family, friends, or just to relax or enjoy nature. After all, this is the rationale for supporting new ways of working, short four-day working week and more flexibility at work.”

In a recent article on The Queen’s Platinum Jubilee Weekend, Zaki Cooper and Nick Loughran, the Co-founders of Integra, also acknowledge the economic cost of the bank holiday but believe it could lead to increased consumer confidence.

“The overall context is challenging, with the economy languishing. The Bank of England recently warned of a recession expected this year, and inflation could reach 10%. If an economy is built on what Keynes called animal spirits, the upbeat occasion of a Jubilee should increase consumer confidence. That is why many well-known brands have been keen to associate themselves with the Platinum Jubilee by sponsoring the spectacles set to take place. Burberry, M&S, McDonald’s, and other large corporates have recognised the benefit of association with the Royal magic.

“Granted, there is an economic cost of an extra Bank Holiday – the one in 2012 was estimated to have cost between £1.2bn and £3.6bn – but this is offset by many benefits. The Jubilee should provide a boost for retail, as shops offer new lines of products and people are influenced by the feel-good factor, keen to latch on to a celebration after the disruption and turmoil caused by Covid since early 2020.

“The hospitality and tourism sectors, which have taken a battering, will also hope for a large influx of tourists, as has been the case with previous Jubilees. The government is attempting to boost this through its no testing policy for fully vaccinated visitors and the introduction of a £10m VisitBritain campaign to encourage international tourism.”

In the article, they also pointed out the economic growth that occurred after the Diamond Jubilee in 2012.

“Previous jubilees have also seen the UK in the midst of economic malaise. The Silver Jubilee in 1977 came at a difficult time for the UK; it was the year the government was forced to borrow $3.9bn from the IMF. The Diamond Jubilee in 2012 followed some years of economic famine following the financial crisis. Encouragingly, however, the growth rate in 2012 of 1.43% showed an increase from the previous year. We would certainly welcome a similar economic boost this time around.”

Could stability be the key?

Queen Elizabeth II is the UK’s longest-serving monarch and the first to celebrate a Platinum Jubilee. As such an enduring figure, could the stability of her reign have a knock-on effect on the UK’s uncertain economic outlook?

Lindsay Stirton, Professor of Public Law within the School of Law, Politics and Sociology at the University of Sussex, comments on the role of a constitutional monarch today.

She says: “Her Majesty has been a stabilising influence on our constitution that often lacks stability. I am very much of the view that the role of Her Majesty in politics has been a real one – and not a purely symbolic one. Before the political parties had very clear leadership rules, she played an important role in the selection of a prime minister, though her role might be described best as a kind of ‘midwife’, helping with the ‘delivery’ by the parties of someone suitable to lead than exercising any kind of choice or will of her own. Essentially, her role is to exercise judgment rather than will.

“Her Majesty has also caused Prime Ministers to ‘think again’ on various matters. For example, when Tony Blair was Prime Minister, he wanted to call an election in early 2001, but Her Majesty dissuaded him from doing so, because of the impact of rural voters traipsing to the polls might have on the spread of Foot and Mouth Disease. So, her weekly meetings with the Prime Minister have been impactful.”

Stability is generally considered good for the economy. So, despite the potential costs to the taxpayer resulting from the Platinum Jubilee celebrations and maintaining a Royal family, many will hope Britain’s longest-reigning monarch will have a stabilising effect on the UK’s current economic uncertainty.