The Crown Estate, a 265-year-old institution that has traditionally passed its profits to the public purse, has made a significant shift in its financial strategy.
The estate has retained almost £1 billion in revenue, choosing to keep the cash on its balance sheet rather than handing it to the Treasury while it waits for landmark borrowing powers to be switched on.
This decision has led to a 58 per cent drop in revenue account profit, which fell to £487 million over the year, down from a record £1.15 billion the year before.
The drop was driven largely by a decision to set aside £886 million for new capital projects, more than double the £441 million retained a year earlier.
The share of gross revenues kept back jumped from 27 per cent to 60 per cent, marking a notable shift in posture for an institution that has traditionally prioritized passing profits to the public purse.
The estate's financial performance was also impacted by the fading of the offshore wind windfall, which had flattered the books in recent years.
Option fees, the payments developers made to reserve patches of seabed for new wind farms, slid 18 per cent from £1.07 billion to £875 million as those projects moved from speculation towards construction.
Strip out the option fees and the underlying picture was steadier, with revenue edging up from £560 million to £600 million, and underlying profit holding at a healthy £1.37 billion.
The six wind farms behind those fees are expected to generate enough renewable power for eight million homes a year once they are running, though the sector's wider build-out has raised questions over delivery timelines.
Net asset value, the worth of everything the Crown Estate owns, rose from £15 billion to £16.7 billion, with part of the gain coming from buying a 220-acre site in Oxfordshire earmarked for laboratory space.
The estate estimates that the new borrowing powers could unlock up to £5 billion of investment over the next decade, which it says will "materially increase the money returned for public spending".
Chief executive Dan Labbad struck a similar note, saying that the new powers will allow the estate to "boost long-term investment in sectors such as renewable energy, housing and science and innovation, and generate increased returns for public spending".
The Crown Estate hands its profits to the Treasury, which then passes a slice to the royal family as the sovereign grant. That share was cut from 25 per cent to 12 per cent in 2023 to reflect the surge in profitability from offshore wind.
However, payments to the King are pegged to the estate's profits from two years earlier, so the grant is set to climb sharply because the Crown Estate booked profits north of £1 billion in that reference period.
The relationship between the Crown Estate and the Treasury dates back to 1760, when George III agreed to surrender the profits from the royal land holdings to parliament in exchange for a fixed annual payment.
Over the past decade, the Crown Estate has returned £5.1 billion to the Treasury, and the estate is now in a position to deploy its new borrowing powers to drive investment in key sectors.
The government's decision to grant the Crown Estate the freedom to borrow has nudged it a step closer to resembling a sovereign wealth fund, an investment vehicle designed to channel returns into assets for the wider economy.
Ministers were explicit about the ambition when the legislation passed, framing the new flexibility as a route to invest in Britain's future across decarbonisation, nature recovery, housing and growth.
