Dubai expansion fuelled by years of cheap money
Worries over Dubai's ability to pay its debts come after years of expansion fuelled by cheap money - bringing a huge potential headache for UK banks.
State-owned developer and investment firm Dubai World's interests range from Scotland's historic Turnberry golf course to a series of UK ports through its acquisition of P&O in 2006 at the less glamorous end.
The company also owns Nakheel, which is behind Dubai's lavish Palm man-made islands developments and works with British companies such as Balfour Beatty.
But Dubai World has racked up a 60 billion dollar (£36.8 billion) debt pile to pay for it all - so any suggestion that it could not pay back these borrowings was always likely to prompt panic.
This arrived late on Wednesday evening from Dubai's department of finance, which said Dubai World would ask all providers of financing to the business and Nakheel for "standstill" repayments until the end of next May.
The announcement - pushed out on the eve of an Islamic holiday - caused predictable chaos in markets, as well as prompting downgrades from rating agencies for debt issued to the company.
Although individual figures for Dubai are not available, according to the latest figures from the Bank for International Settlements, UK banks had a 50.2 billion US dollar exposure (£30.5 billion) to the United Arab Emirates at the end of June.
This is by far the biggest share of the 88.6 billion US dollars (£53.9 million) which European banks as a whole have lent the region.
The developer under the spotlight has an investment portfolio extending across 100 different cities - prompting its boast that the "The Sun Never Sets on Dubai World".
DP World is one of the largest marine terminal operators in the world owning businesses such as Southampton Containers and a share of Tilbury Container Services in Essex.
As well as Scotland's premier golfing resort, the firm's Leisurecorp subsidiary owns a network of US courses through Troon Golf.
The ultimate owner of the business and Dubai's ruler, Sheikh Mohammed Bin Rashid Al-Maktoum, has already turned to its oil-rich neighbour Abu Dhabi for a handout once this year - heightening concerns over whether Abu Dhabi would put its hand in its pocket again.
The bond sale in February came after months of denial that the economic downturn was having an impact on the state, although a steady stream of expatriate workers have been heading home since the turn of the year amid job losses while property prices have collapsed.
Pressure to pay the debts could now put a host of other well-known names owned by Dubai's intricately-linked network of sovereign wealth funds on the block.
Dubai International Capital, a subsidiary of the Dubai Holdings sovereign wealth fund, has a stake in Merlin Entertainments, the firm behind attractions such as Madame Tussauds and Legoland. Budget hotel chain Travelodge and engineering firm Doncaster are also in the portfolio.
The Investment Corporation of Dubai's investment portfolio meanwhile owns airline Emirates, as well as the Borse Dubai, the exchange which is the biggest shareholder in the London Stock Exchange.
Altium Securities' Ian Williams sees a parable for modern times in the current woes of Dubai and the dangers of taking on too much borrowing.
He said: "The biggest...takeaway from the Dubai story is that, despite the months of unprecedented monetary stimulus, debt remains a structural concern.
"Investors need to remember that central banks have been forced to use the policy approach that arguably caused these problems in the first place: excessively loose money. That's a short-term fix rather than a long-term cure."
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