The most common and most likely answer to this crossword clue is the 8 letter word ONLOOKER
I've seen this crossword clue in Financial Times
O
N
L
O
O
K
E
R
More clues leading to the result ONLOOKER
- For him, active role OK? No!
- Witness, removed from case, won’t peach
- Spectator‘s using toilet before King and Queen arrive
- One sees no upset ladies next to king and queen
- Observer wants working person that can draw?
- Spectator occupying throne with king and queen
- One gazes at enthroned king and queen?
- Engaged pair of royals needing witness
- One sees royal couple below using smallest room?
- Witness gents perhaps with grand in gambling city, making comeback
Buddy explains!

The straight part
We know that "Observer" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case observer = onlooker.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does ONLOOKER mean?
ONLOOKER noun- A spectator; someone looks on or watches, without becoming involved or participating.