Kent County Council has rejected claims that it could lose as much as 90 per cent of the £50 million it has tied up in Icelandic banks.

The claim was made by an independent financial expert representing one of the companies that advised local authorities they should stop investing in Iceland.

Mark Horsfield, a director of Arlingclose, a consultancy that advised 50 councils about where to put their money, said current market trading suggesed councils could even lose up to 99.5 per cent

KCC said Mr Horsfield had not taken into account that local authorities were preferred creditors, who would be given priority over others. The council also said it was now expecting some of the money to be returned from one of the three banks, Heritable, in July.

Cllr Nick Chard (Con), KCC’s cabinet member for finance, said: “What is probably true is that people who are not preferred creditors will not get anywhere near 90 per cent of their money back.

“As a preferred creditor, we are very confident of being first in the queue.”

Of the £50 million Kent County Council has tied up, £17 million is with Landsbanki. Administrators of the bank recently indicated its liabilities, of which 40 per cent are deposits, are nearly three times the value of its remaining assets.

Other councils in Kent who invested in Iceland are Dover, with £1 million. The others are Sevenoaks, and Tonbridge and Malling, also with £1 million, and Canterbury, with £6 million.