British banks were teetering on the brink of a fresh meltdown today after it emerged they had invested heavily in crisis-hit Dubai.

An $80 billion debt default in the emirate has already reawakened the spectre of a global 'double dip' - that the first shoots of recovery could be wiped out by a second wave of recession.

But the level of exposure that the crippled British banking sector faces is now under renewed scrutiny.

The crisis was prompted by Dubai World, the development company behind three  palm shaped islands as well as an off-shore replica of the globe , defaulting on its debt.