Okay so I found a noticeable improvement when I changed the sprites resolution. It's a bit hard to explain but here's an example.
When I normally export a 100x100px image from Adobe Illustrator, I export as a png at 72PPI (pixels per inch). when i then import this into C2 its size is generally around 50x50 even though its true size is 100x100. I'm not sure if programes generally do this or whether its a fault on my behalf but either way i was worried that if i scalled it from 50x50 to 100x100 it may be a little pixelated so i've been exporting most of my images from Adobe Illustrator at 150PPI so that when importing it is around 100x100.
This time I decided to re-save them at 72PPI and just scale up the sprites to the desired size which has helped with the performance of the game. It still lags a bit but not near as much as it did. So i'm thinking that a few more tweaks need to be done in terms of the images themselves. I'm just not sure what?
I have a big sprite which is the size of the layout which i use as the game over page. Should i put this in a separate layout instead of it sitting in the game layout and then setting its position when the player is destroyed? Does it slow the game even though it has no use or events until the player is destroyed?