British Business Secretary Peter Mandelson said on Sunday reports that Dubai's handling of the debt crisis at flagship Dubai World will affect its ability to grab future investment, amid a report the firm may offer creditors just 60 cents on the dollar.

Mandelson revealed the Gulf Arab emirate, which gave huge shocks to the global markets in November with plans to delay repayment on $26 billion in debt, must reach a "demonstrably fair" deal with creditors.

"Dubai has to be conscious of the fact that how it resolves its current problems will mean a great deal for the Dubai brand, its reputation and how it secures investment from overseas in the future", he told a British business group meeting in the Gulf Arab emirate.

Dubai World is in talks with banks, seeking to reschedule its $22 billion debt connected to its main property units Nakheel and Limitless World, however, has it is due to present a formal proposal. It staved off default on a $4.1 billion Islamic bond linked to Nakheel, after a last minute bailout from Abu Dhabi in December.

On Friday, Dubai debt insurance costs reportedly soared to 2-1/2 month highs and bond yields rose as growing uncertainty over the fate of the debt-laden conglomerate World sent investors scrambling to hedge their exposure.