British expats flee Dubai

THE party was big enough to be seen from space.

The opening celebrations of the £1billion Atlantis resort in Dubai last November cost more than £15million, and featured a firework display 10 times the size of the one that opened the Beijing Olympics.

Kylie Minogue was paid a reported £1.5million to perform and invitations were studded with hundreds of pounds' worth of Swarovski crystals.

The message behind the gems and pyrotechnics was clear: the rest of the world may be facing the worst recession for decades but Dubai, the vibrant city in the United Arab Emirates that has become a byword for luxury and excess, could still afford to blow tens of millions on a party.

With its almost four million expatriates, including 100,000 Brits, it would flourish; buoyed by financial, media and leisure firms drawn to its artificial shores by the promise of a tax-free income.

A little over two months later, the scene outside Dubai International airport tells a very different story.

Every day the police find cars abandoned by the international terminal, often with their keys in the ignition or stored in the glove compartment.

The sports cars, 4X4s, BMWs and Mercedes have been left there by members of the expatriate workforce.

Having lost their jobs in the economic meltdown, the owners realise they cannot pay back their loans and are simply driving to the airport and using the last bit of credit on their bank cards to buy a ticket home.

For in today's Dubai, the property prices British residents once boasted about to friends and family back home have slumped by more than half in a matter of months.

The second-hand car market is awash with Porsches going cheap and flea markets are flooded with designer clothes.

"The reality is thousands of people have lost their jobs and living the Dubai dream has turned into a nightmare, " says Emma, a magazine editor and long-term resident of the city.

Dubai's sharia laws mean those unable to pay their debts can be imprisoned, just as debtors were imprisoned in England in Victorian times.

Rather than face jail, the expats are heading for the airport before anyone realises how much money they owe, leaving the cars - and often heavily indebted credit cards - behind. Some have even left notes on the dashboard, apologising and explaining that their circumstances left them little choice.

As most of Dubai's banks are not affiliated to international banks, creditors have no way of getting their money back apart from selling vehicles at auctions. In the past three months about 3,000 cars have been sold off in this way.

Also, furnished rented apartments - once so hard to obtain that 12 months' rent had to be paid in advance - are being abandoned, their white goods and plasma screens seized by creditors.

About 20,000 British schoolchildren at private schools are expected to return to the UK because their parents have been made redundant.

When times were good, Dubai's banks, like those in the rest of the world, were eager to lend money without too many stringent checks.

But in Dubai there is no central credit authority to check a resident's credit rating and banks would lend money with no more than a blank undated cheque as collateral.

When a debtor failed to make a repayment and the cheque bounced, he or she would have committed an offence under Dubai law and would be imprisoned until a relative or friend could pay the outstanding debt for them.

Even in 2007, when times were good, 42 per cent of the 3,000 inmates in Dubai's central jail were there because they could not repay bank loans. The number of jailed debtors is expected to rise significantly.

Many of the first expatriates to leave were those manual labourers brought over to Dubai from India to build its lavish skyscrapers, hotels and famous artificial islands, such as Palm Jumeirah, the massive luxury isle shaped like a palm tree that is the home of the Atlantis resort.

But now richer white collar workers are abandoning the emirate in their droves.

As one expatriate British banker put it: "Those who used to spend their time buying up real estate are now spending it queueing up at the embassy to cancel their visas."

At the moment, 1,500 visas are cancelled every day in Dubai.

"While we were all enticed by a taxfree salary and year-round sunshine, when the going gets tough, there are few legal rights, " says Emma.

"UAE labour laws dictate that redundancy victims have one month to find new employment before their visa is revoked and they are ordered to leave the country. However, it sometimes takes much longer for end-of-service severance to be worked out."

Property values are expected to fall by up to 60 per cent this year and beach-side mansions on Palm Jumeirah are half the price they were before the recession.

"A friend who was a general manager for a high-end retailer has not been paid for three months and has been ekeing out an existence on earnings from poker games, despite the fact that gambling is officially illegal here, " says Emma.

"Others are selling their designer clothes in flea markets or wardrobe swap parties, which are new concepts in Dubai."

Since Sheikh Mohammed, the prime minister of the United Arab Emirates and the emir of Dubai, declared in 2002 that foreigners would be allowed to buy land in the city for the first time, many buildings have been bought and sold several times over before work finished on them.

Now more than 50 per cent of Dubai's construction projects, worth billions of pounds, have been postponed for more than a year or cancelled.

Even headline-grabbing building projects have been put on long-term hold.

Last month, the state-owned developer Nakheel announced that work on the Nakheel tower, a £12billion, kilometre-high skyscraper that was to be the tallest building in the world, would be shelved for at least another year.

In a sign of just how crazy the building boom in Dubai had become, work on the Nakheel tower started even before the Burj Dubai, currently the tallest man-made structure ever built, has been finished.

Already the developers have had to halve the original asking price of apartments in the Burj, which isn't due to be completed until September.

It's all very different from Sheikh Mohammed's dream of creating a city in the sand that could grow into a world capital of business and tourism.

Although Dubai has existed for hundreds of years there was no electricity or even a telephone line until the British introduced them in the Fifties.

The discovery of oil in the Seventies transformed its fortunes but Dubai has much less oil and natural gas than neighbouring Abu Dhabi, with sales accounting for only six per cent of Dubai's economy.

Instead Sheikh Mohammed decided to attract business and tourism by allowing foreigners to set up businesses and benefit from a ban on all personal income tax, property taxes and VAT.

Instead public revenue is generated by profits from state-owned utility companies and subsidised when necessary by the oil sales in Abu Dhabi, which sits on almost 10 per cent of the planet's oil reserves.

For a while it worked. Although Dubai's strict sharia laws ban drinking alcohol in public and limit public displays of affection, many Westerners found that they were still able to conduct a relatively hedonistic existence.

However, a few of them have been caught out.

As Vince Acors, the telecoms executive jailed last year after being accused of having sex on Jumeirah beach, put it: "Dubai is a massive contradiction - everything is illegal yet everything is available."

But this isn't the only contradiction in Dubai.

For now the city that prides itself on building everything bigger and better than anywhere in the world is facing a similarly vast exodus of those who once flocked there to make their fortunes.