European football's governing body announced on Saturday (AEDT) that City had been barred from taking part in the UEFA Champions League and UEFA Europa League in 2020-2021 and 2021-2022 because of "serious breaches" of Financial Fair Play (FFP) regulations between 2012 and 2016.

City swiftly confirmed its intention to appeal the verdict to the Court of Arbitration for Sport (CAS), stating it was "disappointed but not surprised" by UEFA's verdict, which also included a $48.5 million fine.

Guardiola joined City in 2016 and has led the club to five of the past six domestic trophies on offer in English football.

Despite falling well adrift of Liverpool in this season's Premier League title race, the 49-year-old has spoken frequently of being open to remaining in Manchester, even beyond the end of his current contract in June 2021.

However, ex-Republic of Ireland centre-back Dunne feels being denied the pursuit of a trophy Guardiola last won at Barcelona in 2011 would change the landscape.

"Wherever he's gone, he's always been there to be a winner. That's what he'll want to remain," he said.

"He wants to go and win trophies and if City is in a situation where they can no longer compete, because it's selling players and can't attract the top players because there's no [UEFA] Champions League football, it will be difficult.

"I think the club has been organised really well — the whole club, not just the first team. They have a structure in place where they will survive and try and rebuild again.

"But to lose someone like Pep Guardiola would be a huge blow. He's what they've worked towards, to try and get him to come in as manager, and he's been successful.

"You listen to players talk about why they sign for teams and Pep is a huge attraction for any player."

Dunne was City's on-field leader during Thaksin Shinawatra's doomed ownership that preceded Sheikh Mansour's 2008 takeover, and he also played for Aston Villa during the time when American owner Randy Lerner abruptly turned off a once free-flowing investment tap.

Significant boardroom ructions often serve to sow uncertainty among the playing staff and Dunne feels City's current situation amounts to a challenging period for Guardiola's squad.

"You don't know what the owners are thinking and what their next move will be," he explained.

"All the players are going, 'Are you staying?', 'I don't know, someone in the Champions League wants to sign me, so maybe if this doesn't work out…'.

"It might be similar to when the owners came in and took over at City. All the players in the dressing room are talking about it and wondering what's going to happen next. Am I secure? Are they going to move me on?

"There is an uncertainty that grows within the club. They'll appeal and the court case will probably go on for a while. The players will be thinking, 'What's going on this summer? Are we in the Champions League or do I move on?'.

"Also, the talk may be that the Premier League is going to act and deduct points. It all becomes a bit messy and, as much as the players concentrate on the pitch and all that stuff, the talk all around them will all be about this situation."

Should star names seek pastures new, Dunne believes opportunity knocks for some of the bright young talents who have found first-team opportunities tough to come by during the Abu Dhabi era in east Manchester.

Phil Foden has broken through 50 senior appearances, although there remains a clamour for the England Under-21 midfielder to start meaningful games more frequently, while 19-year-old centre-back Eric Garcia impressed when thrown into a patchwork defence during the festive period.

Dunne has no doubt over the quality of the youngsters at City's disposal.

"You look at what's happened with Chelsea this year — it's had the transfer ban and it has been able to blood lots of young players," he added.

"City has that number of talented players coming through in the background, its academy is so highly thought of. It just needs players to get to the first team and this may be the opportunity for them.

"You can't say the ban will benefit the club but in every dark cloud there is a silver lining somewhere and maybe for City that's it."

"If the likes of Phil Foden get to play on a more regular basis, if Eric Garcia comes through and other young players make a name for themselves … in the long run, isn't that what UEFA wanted?"