Purpose of Report

The report recommended extending Plymouth Active Leisure's (PAL) existing contract beyond its current end date of March 2032 and providing further financial investment to support its ambitious new strategic plan, which envisions a £160 million investment in sport and physical activity across Plymouth over the medium term, generating greater social value, improved health outcomes, and new income streams for Plymouth City Council.

Decision

Cabinet:

1. Approved a cashflow loan of up to £975,000 to Plymouth Active Leisure (PAL).
2. Approved the reprofiling of two existing loans to PAL to increase the repayment term by three years, including a utility costs loan of £565,983 and a start-up loan of £365,000, totalling £930,983 plus accrued interest.
3. Approved an extension of 10 years to the existing contract with PAL to conclude in March 2042, including the provision of a break clause in 2035/36.
4. Agreed to support feasibility studies and the submission of capital funding business cases through the Council's capital governance process for enhancements to facilities.
5. Noted the following contract amendments: (a) the drafting of new Key Performance Indicators as set out in Appendix B; and (b) a requirement for an annual performance update to the Housing Scrutiny Panel.
6. Noted the positive impact of the Agency Model, as approved by Cabinet on 10 March 2025, and the generation of VAT savings, which have been included in the PAL financial model.

Reasons for Decision

1.    The support from PCC is to cover the working capital deficit built up across the current contract period to date, which was largely a result of start- up costs and the impact of COVID: restoring working capital balances will provide PAL with a sustainable platform to grow and thrive

2.    Extending the contract will enable PAL to repay outstanding loan debts over a longer period, provide operational stability, and allow PAL to continue to align its services with PCC’s wider corporate priorities and those priorities of the City

3.    Extending the contract provides operational stability, whilst a break clause, provides a mechanism for managing the financial risk for the authority.

4.    Noting the feedback from the Scrutiny Committee held on 10 December 2025 to enhance the oversight and risk management of the contract and to ensure robust monitoring of KPIs, financial and contract performance

Alternative Options Considered and Rejected

1.    Cease the Service (reject)- Leisure provision is discretionary, but the service delivered by PAL is vital for sustaining physical activity, generating significant social and economic value, and supporting Council objectives. Ending the service would risk reduced participation and jeopardize long-term Sport England funding, making this option untenable.

2.    Establish a Fully Independent Trust (reject)- Creating an independent charitable trust was explored for tax benefits, but HMRC VAT changes and post-COVID financial instability have made the model unviable. Transferring operations would replicate existing challenges, reduce Council control, increase risk, and incur high set-up costs, so the option has been rejected.

3.    Bring the Service Fully In-House –(reject)Returning the service to full Council control would incur substantial additional costs, including NNDR liabilities and enhanced staff terms and pension obligations. This option is not likely to be viable and has been rejected.

4.    Outsource the Contract (reject)- Engaging a national leisure management company could provide economies of scale, but it would not resolve existing debt, risks misalignment with Plymouth’s priorities, and leaves PCC with legacy asset issues. With high procurement costs, lengthy timelines, and uncertain revenue benefits, outsourcing is not recommended now, though it may be reconsidered at a future break point

Councillor Taylor (Cabinet Member for Customer Experience, Sport, Leisure and HR and OD) presented the report and highlighted the following key points: 

a)    Since January 2026 she had spent considerable time engaging with Council officers and the team at Plymouth Active Leisure (PAL) to fully understand the service, future ambitions, and opportunities for development. These discussions had focused on driving improvements to health, confidence and wellbeing across the city;

b)    PAL had demonstrated significant progress since its establishment in 2022, despite challenges including the pandemic and key performance achievements included: 

                     i.         29% income growth; 

                    ii.        48% growth in fitness memberships; 

                   iii.         Over 49,000 unique users; 

                   iv.         31% growth in swim school participation. 

c)    PAL had strengthened its financial and operational position through new investments, including the upgraded gym at the Life Centre and improved facilities at Tinside, which had attracted wider audiences and increased income. The service was no longer solely about sport and leisure but had become integral to tackling inequalities, supporting long?term health conditions, working with children and families, delivering physio services in partnership with Derriford Hospital, and would soon support those on weight?management waiting lists;

d)    PAL played an important role as a venue for elite and community?level sport, hosting diving events, regional and county swimming championships, and acting as the home venue for Plymouth Raiders, while continuing to remain accessible for all residents. The Mount Wise pools was an example of social value, which allowed free access for children;

e)    Investment in the Life Centre continued to be essential for supporting Plymouth’s sporting talent and ensuring facilities capable of developing future elite athletes. The proposal to extend PAL’s contract would provide long?term stability enabling capital investment, reducing the management fee to the Council, and supporting the development of business cases for income?generating improvements;

f)     The report included detailed KPIs, enhanced governance arrangements, and an annual report to Scrutiny to ensure accountability and focus on outcomes. PAL provided not only services but substantial social value, and they were praised for their brilliant board, strong leadership, and the team’s commitment to delivering for Plymouth residents;

Rhys Jones, Chief Executive of PAL, added the following: 

g)    PAL was deeply passionate about serving Plymouth, and the team was committed to delivering growth, health, wellbeing and further opportunities for communities. The staff were incredibly passionate about the organisation’s future direction;

Professor Steve Madden (Director of Public Health) added: 

h)    Leisure services as a traded service represented a significant opportunity for both the Council and residents. PAL consistently delivered beyond the value of the Council’s financial contribution and emphasised the wider benefits to residents, both through health and wellbeing and the creation of memories and legacy; 

i)     PAL had succeeded despite a difficult early period, demonstrating that strong performance and progress were achievable even during adversity;

The Leader commented that: 

j)     There had been strong use of facilities such as the Central Park pool and the investment had proven worthwhile for the community;

k)    The proposal was not only about facilities but also about mindset and the importance of health and wellbeing. The financial commitments, although appearing significant, were proportionate to the value delivered to the people of Plymouth;

David Draffan (Service Director for Economic Development) added the following: 

l)     The ambition of the plan and the governance improvements achieved through collaboration between the Board and Council officers were praised. The Life Centre attracted one million visitors per year, highlighting its scale and community importance;

m)  Outlined key financial strengths of the proposal, including: 

                         i.        £200 million investment over the contract term; 

                       ii.        Reduction of the management fee from £700,000 to £50,000; 

                      iii.        A significant surplus at the end of the term; 

                      iv.        Expanded capital and maintenance budgets; 

                       v.        £4.7 million in additional income through the plan. 

The Leader further noted: 

n)    That failure to proceed with the proposal would have significant consequences, and that the investment represented good value for money, not only in financial terms but in wellbeing, civic pride and the maintenance of high?quality facilities.

Cabinet agreed to:

1.    Approve a cashflow loan of up to £975,000 to Plymouth Active Leisure (PAL);

2.    Approve the reprofiling of two existing loans to PAL to increase the repayment term by three years, including a utility costs loan of £565,983 and a start-up loan of £365,000, totalling £930,983 plus accrued interest;

3.    Approve an extension of 10 years to the existing contract with PAL to conclude in March 2042, including the provision of a break clause in 2035/36;

4.    Agree to support feasibility studies and the submission of capital funding business cases through the Council's capital governance process for enhancements to facilities;

5.    Note the following contract amendments: (a) the drafting of new Key Performance Indicators as set out in Appendix B; and (b) a requirement for an annual performance update to the Housing Scrutiny Panel;

6.    Note the positive impact of the Agency Model, as approved by Cabinet on 10 March 2025, and the generation of VAT savings, which have been included in the PAL financial model.