Most of the £1 million deposited by a Shropshire council in an Icelandic bank days before its collapse, will be recovered, it was confirmed today.

The former Bridgnorth District Council was accused of negligence earlier this year by the public spending watchdog, the Audit Commission.

It revealed in March that Bridgnorth was one of seven local authorities that failed to heed warning signs about the fragile situation with the Icelandic banks and deposited money.

But today the unitary Shropshire Council said it was expecting to get back £950,000.

It claimed Bridgnorth went ahead and invested £1 million in Landsbanki after credit ratings for Icelandic banks were downgraded below acceptable levels.

In total, £32.8 million was deposited by the seven councils between the downgrading of the banks’ rating to “adequate” in September last year and the collapse of the Glitnir and Landsbanki banks on October 7.

A recovery action plan has been co-ordinated by the Local Government Association.

Simon Alton, Shropshire Council spokesman, said: “There is no precise date when we will get the money back but it will be in the not too distant future.

“We are very prudent indeed as to where we invest the council’s deposits and we will continue with that prudent approach in the future. We are very pleased to be getting money back.

“The loss of the £1 million was not included in the budget of Shropshire Council for this year and so did not make any difference.

“We were not £1 million in debt.

“In terms of how the money will be spent, it hasn’t been decided.”

Bridgnorth District Council denied acting irresponsibly and claimed to have acted on credit ratings supplied to it.

The Audit Commission conceded that confidence in the creditworthiness of some of the Icelandic banks changed relatively rapidly.

But it said a number of credit-rating downgrades should have prompted treasury managers to review the creditworthiness of the Icelandic banks.

By Dave Morris