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The management of the Crown Estate - Treasury Contents


Enhancing revenue

26. In their evidence to us and in their 2009 Annual Report the CEC were, with some reason, bullish about their general performance. As the chart below shows, surplus revenue to the Consolidated Fund has increased every year over the last ten years and by 70.5% over the ten year period.

Figure 1: Net income surplus £m 1999/2000-2008-09

Source: The Crown Estate (Crown Estate Commissioners) Memorandum

Enhancing capital

27. The capital value of the Crown Estate has also increased over the last ten years by 66.7%. However, whilst surplus revenue continued to rise in 2008-09, the total capital value of the Estate fell by 18% to £6 billion. The Annual Report attributes this decline to the general downturn in the UK commercial property sector. In light of this annual decline, we asked the Chief Executive what was a reasonable number of years to assess performance in managing his portfolio. He responded that:

    Probably a ten year time horizon gives you a good feel for that. This is a long term business. This is not a short term business. If you look at our performance over the last ten years, I think we have produced creditable results.[31]


28. In their written evidence, the CEC explained that they benchmark their financial performance against the Investment Property Databank (IPD) which they described as "the property industry's recognised benchmark."[32] As the chart below shows, the CEC have significantly outperformed the IPD over the last ten years.

Figure 2: Total return v IPD

Source: The Crown Estate (Crown Estate Commissioners) Memorandum

Mr Bright attributed this result to:

    [ ... ] a combination of the fact that a number of the properties that we own are of a very high quality. They are prime properties. They are in many instances situated in central London, in London's West End, which is, as I am sure you are aware, a very strong performing centre. One of the other reasons is that our portfolio is very diverse. We have a big commercial property portfolio but we have a rural portfolio and we have a marine portfolio. Those portfolios perform in different ways. The rural portfolio will for example give us capital growth. The marine portfolio will tend to give us high revenue returns. The combination of the quality of the assets and the diversity of the estate has certainly helped us considerably.[33]

It is noteworthy that the CEC benchmarks itself against the private sector. As we outlined in the previous section, however, it is arguable that, as a public body, the CEC have a wider set of responsibilities in the public interest. Accordingly, we asked Mr Bright whether the standards of good management for a leading private sector company and a public body such as the CEC are the same. In his reply he accepted that "there is a particular expectation on us that we always do the right thing."[34]

29. Judged on their own terms as a commercial organisation, the CEC run a very successful business operation. In the next four sections we examine, within each business division, the devil in the detail. We assess performance in each business division and look in particular at circumstances where the extent of the CEC's commercial emphasis appears to rub up against a potential wider public interest and where, as a consequence, questions may arise as to whether the CEC "always do the right thing."

31   Q 131 Back

32   Ev 39 Back

33   Q 137 Back

34   Q 148 Back

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