Sutton Council could lose £1m of public money as only 80 per cent of funds invested in an Icelandic bank account is being recouped.

The authority’s statement of accounts, sent to the Audit Commission, projects 80p on the pound will be recovered from the £5.5m sum.

Councillor John Drage, executive member for resources on Sutton Council, said: “The administrator, Ernst & Young, continues to estimate we will recover at least 80 per cent of our investment and we have received the first part already.

“Should the economy improve, we may receive more than 80 per cent.

"The money frozen in Heritable Plc has had no impact on council services or the level of council tax this year.

“We acted quickly to change the way we invest money and tighten the credit rating criteria for banks we invest with.”

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