A Treasury delegation has landed in Iceland – with the aim of retrieving the £20 billion of assets held by UK savers, councils, charities and businesses.

The team of officials and lawyers representing the UK tripartite authorities – the Treasury, the Bank of England and the Financial Services Authority – will spend the weekend in Reykjavik with negotiations focussed on the fate of the UK Icesave savers’ cash.

A Treasury spokesperson said: “The British government is sending a delegation of officials from the tripartite authorities to Reykjavik to work with the Icelandic government to find a solution to the current situation.”

The force arrives as relations between the two nations are strained.

UK efforts to reclaim cash lost as the Icelandic banking system collapsed – including the use of anti-terror legislation to confiscate assets – has raised the ire of Iceland officials.

Gordon Brown said yesterday the freezing of UK accounts was effectively illegal.

He told the BBC: “What happened in Iceland is completely unacceptable.

“I’ve been in touch with the Icelandic prime minister and I’ve said that this is effectively illegal action that they’ve taken.”

Iceland’s prime minister Geir Haarde said its was “not pleasant” to hear the UK had used anti-terror rules to freeze Icelandic assets and partly blamed the UK for the collapse of the bank Kaupthing.

He said the bank was nationalised “partly as a result of action taken against Kaupthing by British authorities, presumably to safeguard the interests of UK citizens.

“But I think this was very unfortunate.”

Mr Haarde also said the cash held by foreign depositors was not the responsibility or the Icelandic state.

The collapse of Landsbanki earlier this week saw 300,000 UK savers unable to access their cash in the bank’s UK Icesave branch – while over 100 local authorities and some charities face losing up to £1 billion invested in the nation.

Alistair Darling has pledged to cover all retail depositors at Icesave, but the fate of local authorities and charities remains uncertain.

UK savers at Kaupthing and Heritable Bank should be protected as there savings have been transferred to ING Direct.

A small number of Kaupthing Edge and Heritable Bank customers not switching to ING Direct will receive all their cash back under the Financial Services Compensation Scheme (FSCS).

UK assets of Landsbanki have now been frozen by the UK government, with the Treasury doing so due to “concerns about the detrimental effect on the UK economy”.