Huge fall in profits from the Queen's palaces

Profits at the Queen's palaces fell substantially last year as tourists stayed at home because of the foot-and-mouth outbreak and the events of 11 September.

Windsor Castle was worst hit, with visitor numbers falling by more than 300,000 and profits by 20 per cent. The results were similar at Holyroodhouse, the Queen's official residence in Edinburgh. The figures, published today in the annual report of the Royal Collection, reveal an overall trend of declining interest in the royal palaces.

Last year's accounts showed that profits from all the Queen's state palaces had halved from £8m in 1996 to £4m in 2001. The results prompted the Prince of Wales, chairman of the Royal Collection Trust, to comment: "No one could have predicted the dire effects of the foot-and-mouth epidemic on tourism. And the drop in visitor numbers across the whole country has been drastic: this will have an immediate short-term effect on the trust's income."

Despite efforts by the trust to boost visitor numbers, only Buckingham Palace has managed to buck the trend by marginally outperforming the tourist market and slightly increasing its ticket sales. Even so, this year's overall profits are expected to be well below last year's total of £4m.

At Windsor Castle, where visitor numbers have fallen from 1,123,000 to 876,000 in the past two years, staff have begun an aggressive marketing campaign to bring in tourists. But it has failed to halt the continuing decline in revenue from ticket receipts.

In the report for last year, the Royal Collection's director, Hugh Roberts, said the enterprise arm of the collection had met increasing competition from a "number of high-profile Lottery-funded projects". And he predicted: "It is more than likely that the royal residences open to the public will see further reductions in visitor numbers." Buckingham Palace hopes the slump will be reversed when interest in the palaces and the exhibitions run by the Royal Collection is stimulated during the Queen's jubilee year.

The Royal Collection, which was established by the Queen nine years ago, can hold claim to housing the finest and most valuable works of art in the country. Paintings by Canaletto and drawings by Raphael and Leonardo, as well as the art of Reynolds and Gainsborough, are on view in a number of the Queen's residences.

Buckingham Palace insists that the Royal Collection is still profitable and points out that it is the only collection of national importance which receives no government funding or subsidy.

Last week it published the grant-in-aid report for the maintenance of the Royal Palaces, which looks at how it has spent government money. Figures show that because of the slump in last year's ticket sales, the contribution from such income was down by nearly half – from £2.08m to £1.13m. The report also shows that the bill for the fire at Buckingham Palace over the jubilee weekend will amount to about £70,000 – much more than the "few thousand pounds" that was first estimated.

Last week, the Palace opened its accounts to show for the first time how the Queen spends the £7.9m a year paid to her by Parliament through the Civil List. Her advisers were keen to stress that a radical cost-cutting programme over the past 11 years meant the annual cost per person of maintaining the Queen was less than the price of a Sunday broadsheet newspaper.