© Financial Times

This is an audio transcript of the FT News Briefing podcast episode: King Charles and the royal finances

Jess Smith
Good morning from the Financial Times. Today is Monday, September 12th, and this is your FT News Briefing.

[MUSIC PLAYING]

UK financial markets are bracing for Liz Truss’s energy package. Russia’s Gazprom is making record profits even though it’s shipping much less gas to Europe. But first, we’ll look at how King Charles III might manage the Crown’s vast financial holdings. I’m Jess Smith, in for Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

King Charles embarks on a tour of the United Kingdom today to show his commitment to the four nations that make up the UK. He’ll start in Edinburgh. He’ll lead a procession that takes his mother’s coffin to St Giles’ Cathedral. Now one of Charles’s ongoing tasks will be to manage the Crown’s vast financial holdings. The FT’s senior business writer, Andrew Hill, has been writing about how the Queen managed them. He joins me now to talk about how Charles might handle them. Hi, Andrew.

Andrew Hill
Hi.

Jess Smith
Can you remind me briefly of the extent of the Crown’s holdings?

Andrew Hill
So the Crown Estate has got £15.6bn of property and that includes big chunks of central London, Regent Street, but it also includes commercial parks, retail parks, countryside, and then the Duchy of Lancaster. That’s a private estate. It’s 18,000 hectares plus and with a net asset value at the last count of £653mn. So these are not insubstantial holdings, which, of course, tot it up would make the King one of the wealthiest people in the world. He still is, even without the public holdings.

Jess Smith
So Andrew, do we have a sense of how King Charles’s management style might differ from Queen Elizabeth’s?

Andrew Hill
Well, that depends a bit on whether you think that he’s going to be able to have a different style, because as Prince of Wales, heir to the throne, he was in charge of what’s called the Duchy of Cornwall, which was a range of assets and property and residential and commercial land, a lot of it. And he was pretty hands on. He chaired meetings of the equivalent of their board of directors. But as King, like his mother, he won’t have as much freedom, I think, to deal with the assets that the Crown owns. And he may have to behave a little bit more like his mother, who, as far as aides and courtiers who talked to me, described it, was very much a kind of light touch non-executive chair.

Jess Smith
Andrew, what do you mean by light touch?

Andrew Hill
The way in which her general style was described to me was as sort of decision making by osmosis. Essentially, officials of the palace and royal family prepare decisions for her, and she’s not really in a position where she can change those decisions. But clearly, if they were pressing for something, some reform of the way things were done, they would bring it to her for her approval. And as I was told that a lot of the time she surprised them by approving reforms, but they were generally pretty gradual. And I think there are few areas where she was able to take sort of radical decisions, and that’s probably for the good because in some respects, she and now King Charles are just stewards of a national institution. She and Charles do have a bit more leeway on their private assets. But even there, there’ll be such a huge scandal if the King decided suddenly to sell off Balmoral or even bits of it, that you can’t imagine that he would do anything of that sort.

Jess Smith
Andrew Hill is the FT’s senior business writer. Andrew, thanks so much.

Andrew Hill
My pleasure.

[MUSIC PLAYING]

Jess Smith
UK prime minister Liz Truss announced a £150bn plan last week to blunt the pain of soaring energy costs. It’s still unclear how she’ll fund it. Financial markets have an idea. They’re expecting a lot of new government debt to hit the market. Here’s the FT’s Ian Johnston.

Ian Johnston
This comes at a time also when Liz Truss wants to cut taxes further for businesses and for individuals, which also will require funding. And the Bank of England wants to sell off bonds as part of quantitative tightening to lower its portfolio of bonds. So that’s a lot of fresh debt entering the markets. And investors and analysts are a bit worried about what this will mean for bond prices.

Jess Smith
So what does that mean for markets in the coming weeks?

Ian Johnston
We can expect over the weeks ahead for the prices of bonds to fall. That’s a lot of extra supply coming in and for them to be falling a bit more than competitors in other countries. And some analysts are predicting that UK 10-year bonds will rise, that yields will rise to around 4 per cent, which to put into context is quite a jump considering they were at around 1.5 per cent in the beginning of August.

Jess Smith
Ian, what are some of the other knock-on effects you see happening?

Ian Johnston
This fall of bonds ultimately means higher borrowing costs and it comes at a time when inflation is already running quite high. Now, Truss’s plan to cap energy bills will help to tackle inflation over the short term. But they’re also saying that the Bank of England will have to keep interest rates at a high level for longer. So that obviously limits growth for the UK and it means that there’s this slight squeeze on a number of UK assets.

Jess Smith
That’s the FT’s Ian Johnston.

[MUSIC PLAYING]

Russia’s state energy group, Gazprom, is making record profits, and that’s despite sending a fraction of the gas to Europe that it sent last year. One analyst estimates that Gazprom revenues could jump 85 per cent this year to $100bn. The FT’s Nastassia Astrasheuskaya says profits are soaring because gas prices have been rising even before Moscow invaded Ukraine.

Nastassia Astrasheuskaya
The prices are tenfold from they were in 2019. If you look at last year, Gazprom already started squeezing supplies. It kept saying it fulfils its obligations to European customers, but supplies kept going down. And they will be even lower this year.

Jess Smith
Now the EU is considering a cap on the price it’ll pay for Russian gas. This is after G7 nations agreed to do that for Russian oil.

Nastassia Astrasheuskaya
Well, Russia has responded, saying that they will not supply under these conditions and they’ll just stop supplies whatsoever. Except with gas, it’s much harder for Russia to do than with oil. With oil, it can easily reorientate supplies elsewhere like it has to China and India. And with gas, since it’s pipeline gas and the pipelines from western Siberia are built specifically going west to Europe, it cannot as easily reorient that gas to China or anywhere else in Japan. It is building a second pipeline to China. It will take years to complete that. So this is eventually, it’s gonna get tricky for all parts. Just so far, Russia and Gazprom seem to be winning.

Jess Smith
Nastassia Astrasheuskaya is the FT’s Moscow and central Asia correspondent.

[MUSIC PLAYING]

Before we go, Ukraine’s defence minister says his lightning offensive in the northeast part of the country over the past few days went better than expected. Ukrainian forces routed the Kremlin’s troops and regained 3,000 sq km of territory. This prompted an unusual admission by Russia’s defence ministry that troops had to retreat. Ukrainian defence minister Oleksii Reznikov says his forces now need to secure the area. He also warned of a Russian counterattack.

[MUSIC PLAYING]

You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article

Comments

Comments have not been enabled for this article.