The prevalence of type 2 diabetes (T2D) has increased worldwide and doubled over the last two decades. It features among the top 10 causes of mortality and morbidity in the world. Cardiovascular disease is the leading cause of complications in diabetes and within this, heart failure has been shown to be the leading cause of emergency admissions in the United Kingdom. There are many hypotheses and well-evidenced mechanisms by which diabetic cardiomyopathy as an entity develops. This review aims to give an overview of these mechanisms, with particular emphasis on metabolic inflexibility. T2D is associated with inefficient substrate utilisation, an inability to increase glucose metabolism and dependence on fatty acid oxidation within the diabetic heart resulting in mitochondrial uncoupling, glucotoxicity, lipotoxicity and initially subclinical cardiac dysfunction and finally in overt heart failure. The review also gives a concise update on developments within clinical imaging, specifically cardiac magnetic resonance studies to characterise and phenotype early cardiac dysfunction in T2D. A better understanding of the pathophysiology involved provides a platform for targeted therapy in diabetes to prevent the development of early heart failure with preserved ejection fraction.