LANCASHIRE County Council says it expects to receive at least £8million of a £9million investment in a failed Icelandic bank.

A court ruling could pave the way for UK councils to recover their deposits in Landsbanki, which is being wound up by administrators.

Burnley Council has £1million tied up in the bank, and also expects to recover the majority of its investment.

The Icelandic District Court has ruled that UK depositors have ‘priority’ status when the bank’s assets are divided.

County Hall treasurer Gill Kilpatrick said: "Obviously we are very pleased at the outcome. Based on the current statement of assets and liabilities of Landsbanki, we anticipate that we will recover between 85 and 90per cent of the value of our claim.

"This final figure is still subject to confirmation. We are unlikely to find out until some time in the summer.”

In October 2008 it was revealed that Lancashire County Council was among 45 local authorities to have money tied up in the collapsed bank. Just under £2.5million of the total was from Lancashire’s Pension Fund. Lancashire Police Authority also has around £1million invested. County Hall subsequently changed its investment policy.

The council could appeal to the Supreme Court given the amounts at stake, Ms Kilpatrick said.

She added: “We will continue our hard work to recover as much of Lancashire's money as we can."