Your children are British, but your grandchildren will have to apply for citizenship. As I understand, if your grandchildren are born in Britain, they will become full UK citizens. Birth certificate / passport application for newborn both parents british registering birth with British Consul? http://en.wikipedia.org/wiki/British_nationality_law
British Citizenship can be acquired in the following ways:
- lex soli: By birth in the United Kingdom to a parent who is a British citizen at the time of the birth, or to a parent who is settled in the United Kingdom
- lex sanguinis: By birth abroad, which constitutes "by descent" if one of the parents is a British citizen otherwise than by descent (for example by birth, adoption, registration or naturalisation in the United Kingdom). British citizenship by descent is only transferable to one generation down from the parent who is a British citizen otherwise than by descent, if the child is born abroad.
- By naturalisation
- By registration
- By adoption