MILLIONS of pounds of public money lost in the Icelandic banking collapse is being recovered.

West Sussex County Council has managed to recoup nearly £13 million which they deposited with Heritable Bank - the "lion's share" of their investment.

This money was then lost when the bank's parent company Landsbanki collapsed during the Icelandic banking crisis, which saw all three of the country's privately owned commercial banks default.

The council invested £12.9 million and has said they stand to now recoup between 98 and 100%.

An initial payment was made in August, 2013, but now the bank’s administrator has confirmed an additional payment will be made in August.

Louise Goldsmith, leader of West Sussex County Council, said: "From day one we were determined to recover the money invested at the time of the crash. I remember saying that it would take between ten and 15 years so I’m delighted we’ve recovered this money for the taxpayers of West Sussex much sooner than that.

“Our determination has paid off and we stand to recover between 98% and 100% of the money we invested. This is good news for the West Sussex taxpayer. The money will go back into supporting our key frontline services.”

The Nordic nation became the first western European country in 25 years to appeal to the International Monetary Fund to save its battered economy in 2008.

In total, councils across the UK had more than £1billion invested with Iceland’s three largest banks- which collapsed during the crisis - Landsbanki, Glitnir, and Kaupthing Singer and Friedlander.

The crash was one of the largest experienced by any country in economic history and it emerged the nation’s banking system owed an estimated six times the country’s value.

This meant Iceland’s biggest banks were unable to re-finance loans when the world’s credit markets dried up in the wake of the failure of US investment bank Lehman Brothers.

Brighton and Hove City Council and East Sussex County Council did not have any money invested in the Icelandic banks.