People who work in the City have always had a dark sense of humour. Accordingly, there was a saying doing the rounds in the Square Mile and Canary Wharf: “It’s Mumbai, Shanghai, Dubai or goodbye.”

In other words, unless you were prepared to deal with or work in at least one of these emerging financial centres, you could forget a sustainable business or career.

Suddenly, though, one of those options is off the agenda. And the situation unfolding in Dubai could be good for the UK financial services industry in particular, and Britain in general.

That may not seem obvious, since British banks appear to have more exposure than their peers to the United Arab Emirates, much of it in Dubai. But the chances are that, after this setback, Dubai’s ambitions of becoming a serious financial centre are over. Leading global financial spheres don’t even raise the possibility of defaulting on their debts.

Throughout the past decade, the balance of world economic power has been shifting from West to East. China, with its mighty manufacturing sector, India, with its highly educated middle class and Dubai, with its meteoric rise, jaw-dropping architecture and party scene, all epitomised the potential riches on offer. Why, it was asked, would anyone want to invest in dreary, mature markets, such as Britain?

But Dubai has given a reminder, highlighting that emerging markets are, by definition, risky.

It is only sad that a reminder was necessary. After the collapse of the Iron Curtain, investors flocked in the early 1990s to Russia, anxious to enjoy the returns offered by its own unique form of capitalism.

However, when Russia defaulted on its debts in 1998, there was a rude awakening. The laws of property ownership did not work as they did in established financial centres such as London and New York. There wasn’t the transparency that investors were used to in those places — nor the same level of communication. Most seriously, when things started to go wrong, there was no due process in place.

While the problems in Dubai may not prove as serious as first thought appeared to be the case — and there are certainly plenty of City folk arguing that the panic is being overdone — similar questions are now being asked about the desert state.

Investors in Dubai-based assets are realising that they may not get all their money back.

The wave of money and power shifting from West to East may be unstoppable. But perhaps Dubai will remind investors that, in comparison with emerging markets, business in Britain and the West still has advantages.

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