Alpamare Report Concludes Council Loan was "Risky" And Based on "Incomplete Information"

A fact-finding review of the loan of £9 million by the former Scarborough Borough Council to the private developer behind the Alpamare Water Park has concluded the loan put the council's finance at "increased risk"

The review, undertaken by North Yorkshire Council’s internal auditors, Veritau, has focussed on the strength of decision-making to try and establish the reasons why all the risks relating to the loan were not properly identified or mitigated. 

The former Scarborough Borough Council (SBC) approved the granting of a loan of £9 million to Benchmark Leisure Limited on September 9, 2013, to help finance the construction of a new water park. 

The water park was a key element of a regeneration project covering The Sands and the wider North Bay area of Scarborough. The borough council had identified the need to provide a ‘principal visitor attraction’ to support the local tourism economy and in turn to bring growth, jobs and further investment into the area.

Benchmark Leisure Limited was selected as the borough council’s development partner following an informal tender process.

The report has concluded that councillors "made decisions in the interests of Scarborough and its residents and to ensure the regeneration of The Sands Development was completed". 

However, it also found there were some key weaknesses in how the information was shared, risks were assessed and recommendations were presented. 

Key learning points in the report into the financing of the Alpamare seafront development include:

• A lack of clarity in the council reports and presentations regarding whether this was a commercial loan or an investment by the council.
• In some cases, risks were not fully and properly articulated. Insufficient attention was also given to the actions which could be taken to mitigate those risks.
• The key risk that the water park might not be commercially viable was not adequately addressed.
• Officers also failed to provide a recommendation to full council based on their professional knowledge and assessment of the risks. This was a particular omission given the complexity of the proposed agreement with Benchmark Leisure Limited.
• With hindsight, it is clear that the decision to approve the loan to Benchmark Leisure Limited was based on incomplete information and therefore put the borough council at increased risk.
• Potential income levels from visitors and local residents proved to be over-ambitious and expert advice to Benchmark Leisure Limited, which questioned the initial consultant findings on the financial business case, was not heeded.    
• The lessons from this review should inform the decision-making processes for future regeneration projects. In particular, the need to effectively identify, report and mitigate potential risks.    

Reviewing the investigation report, North Yorkshire Council’s leader, Cllr Carl Les, said:

“The decision to grant a loan to Benchmark Leisure Limited was undoubtedly risky, particularly as the company had reportedly failed to obtain a loan from its bankers or other sources.

“While the report concludes that councillors understood that there were risks with the proposed agreement, it’s also clear that these should have been set out more clearly. 

“The report states that in the circumstances, it is not possible to know whether the decision by full council would have been different, but at least councillors would have been better informed.  

“However, it seems fair in the context of the day to conclude that senior councillors may have been concerned for the whole development and decisions made at a time when generally councils were encouraged to adopt a more commercial approach at a time of austerity. 

“It’s important we understand what went wrong here so that all learning can be applied to future regeneration projects to make sure that when we invest on the public’s behalf, we do so based on sound information and expert recommendations.

“It’s also important to make the point that the Alpamare Water Park is today very much part of Scarborough’s visitor offer as well as being enjoyed by very many local residents.”    

The Veritau report has been compiled from documents, meeting records and interviews with the following people:

• Lisa Dixon (former Director of Democratic and Legal Services, and Monitoring Officer at Scarborough Borough Council)
• Nick Edwards (former Director of Business Support and s151 Officer at Scarborough Borough Council)1
• Kerry Metcalfe (former Corporate Finance Manager and Deputy s151 Officer at Scarborough Borough Council)
• Carol Rehill (former Head of Legal and Governance and Deputy Monitoring Officer at Scarborough Borough Council)
• Roland Duce and Richard Moore (Benchmark Leisure Limited)
• Tom Fox (former Leader of Scarborough Borough Council)
• Councillor Eric Broadbent
• Councillor Derek Bastiman
• Councillor David Chance
• Councillor Michelle Donohue-Moncrieff
• Councillor Subash Sharma
• Councillor Janet Jefferson

Key Conclusions from the report include:

"The decision to grant a loan to Benchmark Leisure Limited was undoubtedly risky.

The company had reportedly failed to obtain a loan from its bankers or other sources and the due diligence checks carried out by officers had identified concerns with the company’s finances."

"The proposal considered by Councillors on 9 September 2013 was both risky and complex in nature.

The decision taken by Councillors was taken in the knowledge that there were risks, but in the interests of Scarborough and
its residents, and to ensure the Waterpark and wider Sands regeneration could be completed. The decision was also taken at a time when Councils were being encouraged to adopt a more commercial approach at a time of austerity."

"Officers involved the Leader, Cabinet Members and other Councillors in working groups and briefing meetings throughout the period prior to the decision being taken.

The reports prepared by officers also contained sufficient information for Councillors to make a considered decision but there was a lack of clarity about key aspects of the proposed agreement with Benchmark Leisure Limited. In particular, it was not clear whether the Council was borrowing funds to part-finance the construction of the Waterpark or whether it was to enable the Council to provide a commercial loan to the company.

Officers also failed to provide a recommendation to Full Council based on their professional knowledge and assessment of the risks. This was a particular omission given the complexity of the proposed agreement with Benchmark"

"The reports to Full Council contained details of the potential risks of the agreement but in some cases these risks were not fully and properly articulated. Insufficient attention was also given to the actions which could be taken to mitigate those risks."

The key risk that the Waterpark might not be commercially viable was recognised by Councillors and officers but not adequately addressed.

The projections for visitor numbers prepared by Benchmark Leisure Limited and Alpamare UK Limited were overly optimistic, but these were not properly challenged. Instead, the Council appears to have placed too much reliance on the findings of the feasibility study undertaken by Leisure Development Partners LLP but commissioned by Benchmark

The report concludes:

"With hindsight it is apparent that the decision to approve the loan to Benchmark Leisure Limited was based on incomplete information and therefore put the Council at increased risk.

Councillors understood that there were risks with the proposed agreement, but the report should have set these out more clearly.

No evidence has been found to suggest that Councillors or officers accepted gifts or hospitality from any third parties"

The report states that the initial agreement between SBC and Benchmark was that SBC would fund the loan through external borrowing. It was also proposed that Benchmark Leisure Limited would make rental payments equivalent to £440,000 to the borough council. The rent received would be used to service the loan. 

In addition, it was proposed that eight per cent of the annual turnover from the water park would be paid into an ‘improvement fund’ held by the borough council. This would be used to fund the future replacement of equipment within the water park, for example the slides, subject to the agreement of Benchmark Leisure Limited and Alpamare UK Limited. 

A supplementary agreement was then finalised and signed on April 25, 2014. The agreement was structured so that Benchmark Leisure Limited provided the initial £5 million of funding and the loan from SBC was then used to fund the final stages of the build costs. The loan itself being drawn down in stages as the work progressed. 

The company also accepted the full risk of any potential cost overruns arising from the building work. SBC was required to charge a commercial rate of interest of 5.85 per cent on the loan to Benchmark Leisure Limited to comply with the European Union (EU) state aid rules and Benchmark Leisure Limited had to follow a full procurement process to award the construction contract. The rate of interest was fixed for the duration of the loan. 

Due to a number of delays, the waterpark opened later than expected in July 2016. 

The building included a wave pool and a number of slides, a splash and play area, and outside pools. There was also a café and outdoor bar. 

A luxury spa was supposed to form part of the initial waterpark development, although Benchmark Leisure Limited delayed work on this part of the project. The company only informed SBC of the delay towards the end of the construction programme. 

The spa itself was only completed and opened to the public in March 2019. 

Benchmark Leisure Limited arranged for a separate company, Alpamare UK Limited, to operate the Waterpark.

Within two years, Alpamare UK Limited was experiencing cashflow issues and it was unable to pay HMRC and a number of suppliers. 

On August 15, 2018, Alpamare UK Limited’s main creditor, British Gas, commenced the process to have the company wound up. In turn, Alpamare UK Ltd petitioned for, and secured, a company voluntary agreement (CVA) on January 21, 2019.  

From April 2019, Benchmark Leisure Limited ceased to make regular rental payments to SBC. The borough council therefore had to take legal action to recover the outstanding debts of about £7.9 million. 

Benchmark Leisure Limited announced the temporary closure of the water park on October 12, 2023, and the company then entered into administration on October 20, 2023. SBC was owed approximately £7.9 million by Benchmark Leisure Limited at this time.   

This situation was inherited by North Yorkshire Council on April 1, 2023, when eight councils became one under local government reorganisation.

North Yorkshire Council took full possession of the water park site on December 20, 2023.  

The full report can be seen at https://www.northyorks.gov.uk/sites/default/files/2025-08/North%20Yorkshire%20Council%20-%20Scarborough%20Waterpark.pdf