Millions of pounds frozen in a collapsed Icelandic bank are expected to flood back into Sussex as the firm's assets are melted down by administrators.

The news will come as a welcome relief to those with money locked up in the UK-licensed bank Heritable but their investments will not be returned in full.

The bank went into administration when its parent company, Landsbanki, collapsed in September last year.

Investors from Sussex had pumped millions of pounds of taxpayers money into the bank believing it to be a safe investment.

They included West Sussex County Council which had put in almost £13 million, Lewes District Council which had £1 million at risk and Sussex Police Authority which had invested £6.8 million.

But despite the efforts of administrators Ernst and Young to pay back the investors, not all of the money will be returned right away, if at all.

Their report suggested that investors could receive the first 70% of their money back, perhaps as early as July.

West Sussex County Council welcomed the news.

Louise Goldsmith, cabinet member for finance and resources, said the council was now planning ahead for the next financial year on the basis that it would get about £9 million back.

She was also hopeful that the council would recoup the remaining £3 million.

She said: "Before placing our investment, we followed all Government guidelines and took proper professional advice.

"The failure of a British-regulated bank is something that would have been unthinkable 12 months ago.

"Even the local government watchdog, the Audit Commission, had money invested with Heritable."

Richard Hornby, treasurer of Sussex Police Authority, said it expected to get about £4.8 million of its £6.8 million stake returned this summer.

He said: "The administrators may have spoken about creditors only securing 70 to 80% of their investment, but they have to err on the side of caution.

"Heritable is still trading and making money, so the prospects of a better return are in place."

But while the county council and police authority look set to claw back some of their investment, Lewes District Council still faces a nervous wait.

It put £1 million into a different bank, the Landsbanki Island hf bank.

A spokeswoman for the council said: "We are delighted by the news from the Local Government Association that councils expect to get the lion's share of this money back and we will continue to work to ensure that the council taxpayer is top of the list for repayment."

Cats Protection, which is based in Haywards Heath, still has £11 million caught up in Icelandic bank KSF.

It is expecting news on its fate in the next week.