The Government has insisted it is committed to getting £2.3 billion of savings back from Iceland despite people there appearing to resoundingly reject a plan to repay the money.
With more than 40% of the ballot counted, 93% had voted "no" in a referendum over whether to pay billions of pounds back to the UK and Holland following the collapse of savings bank Icesave.
The Government, which was forced to compensate tens of thousands of UK savers after the collapse in 2008, was understood to be "disappointed" but "not surprised" at the apparent result.
A Treasury spokesman said: "The UK remains committed to reaching a final agreement with Iceland in due course. The result of the referendum is a matter for Iceland."
The British and Dutch governments want reimbursement for the 3.8bn euros (£3.4bn) they paid out in compensation to customers in 2008.
Talks between Iceland, Britain and the Netherlands to come up with a better deal to try to avert yesterday's referendum broke down at the end of last week.
Many voters in Iceland have objected to the tough terms of the deal imposed by the debtor countries, not the idea of payment itself.
It would seemingly require each person to pay around 135 dollars (£89) a month for eight years - the equivalent of a quarter of an average four-member family's salary.
"This result is no surprise," said Prime Minister Johanna Sigurdardottir. "Now we need to get on with the task in front of us, namely to finish the negotiations with the Dutch and the British."
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It is understood the British offered the Icelandic authorities a "best offer" for repayment, including an interest rate equal to that for a loan from the Nordic countries that the Icelandic Government accepted in July 2009.
