A £1million investment with a failed Icelandic bank by Burnley council financiers was due to be returned just 24 hours after the venture collapsed, it has been revealed.

Bosses at Burnley Town Hall had lodged the cash reserves with the British arm of the controversial Landsbanki empire, on September 15.

But the day before the short-term deal was due to expire, it was announced that Landsbanki had crashed, leaving Burnley’s £1million, and similar investments by other local authorities, in limbo.

Deputy council leader Coun Margaret Lishman, also executive member for resources, said, at a meeting of Burnley full council: “Members will be aware that we wrote to Landsbanki on October 8, and also wrote to the council’s brokers and the council’s bankers on that date.

“Councillors will also be aware that the (deposit) failed to be returned on the day that it was due to returned because as of that date (Landsbanki) was taken into receivership.”

Coun Lishman said that the Burnley authority was in close consultation with the Local Government Association, which is acting on behalf of dozens of authorities affected by the Icelandic crash.

The council has also reviewed its legal position over the £1million deposit, as their investment was made with the British arm of Landsbanki, which has had its assets frozen by the UK government.

Cash-sensitive items, such as the council’s medium-term financial strategy and accommodation strategy, were withdrawn at the same council meeting until the authority’s fiscal outlook became clearer.

Coun Lishman warned that there would be an ongoing loss of interest, in relation to the missing £1million, and she would keep councillors informed of any developments in the ongoing crisis.

Earlier this week Lancashire County Council leader, Rossendale North member Coun Hazel Harding, said she expected the £10million which her authority had lost in the same crash would be recovered.