Scarborough Council’s £9m water park loan put finances at risk
An investigation has found that while councillors acted in the interests of the town, the decision left the authority’s finances at “increased risk”
A review into a £9 million loan made by the former Scarborough Borough Council to the developer behind Scarborough’s Alpamare Water Park has concluded that while councillors acted in the interests of the town, the decision left the authority’s finances at “increased risk.”
The investigation, carried out by North Yorkshire Council’s internal auditors Veritau, found that councillors approved the loan in 2013 to support a key regeneration scheme at The Sands and North Bay. At the time, the authority wanted to secure a major visitor attraction to boost tourism, jobs and investment in the town.
Benchmark Leisure Limited was chosen as the council’s development partner and agreed to fund the first £5 million of construction costs, with the loan covering the final stages of the build. The loan carried a fixed interest rate of 5.85 per cent, in line with EU state aid rules, and was to be repaid through annual rental payments of £440,000, along with a share of the park’s turnover placed into an improvement fund.
Despite these arrangements, the review found that the decision-making process was undermined by weaknesses. Reports presented to councillors were unclear on whether the deal represented a commercial loan or a council investment.
Some risks were not fully explained, and the possibility that the water park might not be financially viable was not adequately addressed. Officers also failed to make a formal recommendation to councillors based on their professional assessment, something auditors described as a serious omission given the complexity of the project.
When the park eventually opened in July 2016, after delays, it featured slides, pools, and outdoor facilities. A luxury spa, initially promised, was only completed in 2019. Benchmark appointed Alpamare UK Limited to operate the attraction, but within two years the operator was struggling with cashflow and entered a company voluntary arrangement in 2019.
By April that year, Benchmark had stopped making rental payments to the council, leaving debts of nearly £8 million. In October 2023, the company entered administration, shortly after announcing the temporary closure of the park.
The review concluded that councillors had acted in good faith but had been given incomplete information, leaving the council exposed. It also noted that income projections had been over-ambitious and warnings from independent advisers were not heeded.
North Yorkshire Council leader Cllr Carl Les said the findings highlighted the importance of stronger governance in future regeneration projects.
“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,” he said.
“While the report concludes that councillors understood there were risks, it’s also clear they should have been set out more clearly. It is not possible to know whether the decision would have been different, but councillors would at least have been better informed.”
Cllr Les added that the decisions were taken at a time when councils were being encouraged to adopt more commercial approaches during austerity, but that lessons must be applied to future schemes: “When we invest on the public’s behalf, we must do so based on sound information and expert recommendations.”
North Yorkshire Council inherited the issue when it replaced Scarborough Borough Council and seven others in April 2023. It took full possession of the Alpamare site on 20 December 2023.
Despite the financial problems, Cllr Les noted that the water park remains part of Scarborough’s visitor offer and is well used by residents.