Councils that lost hundreds of millions of pounds have welcomed comments from the Icelandic Prime Minister promising that they ‘will get all their money back'.

More than 140 UK local authorities had a total of £1bn frozen in defunct accounts, but Sigmundur David Gunnlaugsson has now insisted they will be repaid in full.

LGA chairman Sir Merrick Cockell said: ‘It is encouraging that the authorities in Iceland recognise the need to ensure that councils and other priority creditors get their money back as soon as possible.

‘The LGA's hard work secured its members priority creditor status.  We have now got back more than £800m and will continue to work hard to get the best deal we can for councils.'

Chairman-elect of the County Councils' Network, Cllr David Hodge, added: ‘We welcome the statement from the Icelandic Prime Minister that local government will get our money back and we would like to congratulate the LGA and Sir Merrick for their advocacy work on this issue.'

Kent CC, which with £50m had deposited more than any other council in the collapsed banks, jointly led a delegation to Iceland as part of efforts to recover the cash.

A council representative said it was waiting for £7m, adding confidently: ‘We're expecting all of it back.'

Hertfordshire CC originally feared that £28m of cash invested in troubled Icelandic banks could be lost.  The council's deputy cabinet member for resources Cllr Terry Hone said: ‘We're confident that we will recover the majority of our money.
 
‘To-date, we have recovered just under 70% of the money we invested in the four Icelandic banks.

‘We're working with other creditors through the LGA and its lawyers to recover the rest of our deposits.'

Steven Mason, corporate director of finance for Northumberland CC, added: ‘There was an amount of £23m paid into four Icelandic banks.  We expect to recover circa 95% of this amount.'

Epping Forest DC is owed £150,000 or 6% of the £2.5m it had invested in Heritable Bank.

A council representative said: ‘It would be good news if the remaining amounts can be paid back as quickly as possible.'