I'm not afraid, said British hostage who was doing one last job before retiring

They were the images the British government had dreaded seeing: grainy, juddering, ill-focused video footage of a blindfolded British civilian held by Islamist terrorists. Yesterday it happened.

They were the images the British government had dreaded seeing: grainy, juddering, ill-focused video footage of a blindfolded British civilian held by Islamist terrorists. Yesterday it happened.

One of Iraq's most ruthless groups released a short burst of video proving they had kidnapped Kenneth Bigley, 62, a British expat engineer who disappeared on Thursday. Unshaven and haggard, he was shown briefly, apparently confirming his name and identity.

Until his capture in a smart suburb of Baghdad three days ago, Mr Bigley had been just another ageing civilian contractor building up a comfortable cushion of money for his retirement. A young Thai wife is waiting for him in Thailand. He had joked with his neighbours that his current posting to Baghdad, working for a US contractor, would be his last before he headed east. He was, he laughed, too old for any kidnappers to bother with.

Mr Bigley had been in Baghdad for some time, arriving soon after the city was occupied by the coalition. He had built up a rapport with his neighbours, allowing his less fortunate Iraqi friends to feed off electricity from the generator in his villa's front garden. He was easy-going - perhaps to the point of carelessness, his neighbours suggested.

Unlike their more nervous compatriots, Mr Bigley and his two US colleagues kidnapped with him on Thursday, Jack Hensley and Eugene Armstrong, had not employed any of the hundreds of heavily armed Western security guards in Baghdad to protect their two-storey house in the al-Mansour district.

They had used unarmed, locally hired guards, and driven distinctive 4x4 vehicles. One neighbour, who had struck up a bond with the Briton by discussing football, told reporters that he had urged Mr Bigley to leave earlier this month. "Two weeks ago, I told him: 'Why are you here? It's dangerous. There are kidnappers.'" His friend apparently waved off his advice, saying: "I'm not afraid - you only die once."

On Thursday, the kidnappers struck. At about 6am, Mr Bigley and his colleagues were seized by a group of around 10 men who broke into their grounds. Neighbours said the three were dragged out on to the street, gagged and handcuffed, without a shot being fired.

Yesterday, one of Iraq's most ruthless terrorist groups, Tawhid and Jihad (Unification and Holy War), confirmed the worst fears of British diplomats and the men's families by confirming it had seized them.

In a short burst of video broadcast by the Qatar-based satellite channel al-Jazeera, a hooded and dark-clothed man was seen standing behind the three captives. The news channel said the group had stated they would be executed in 48 hours unless the coalition forces released all their female detainees.

It is a threat that the Foreign Office is taking extremely seriously. Their kidnappers are linked to the man alleged to be al-Qa'ida's most senior leader in Iraq, Abu Musab al-Zarqawi. It has already been responsible for repeated suicide bombings and abductions. Al-Zarqawi, who is suspected of being involved in the beheading of the US contractor Nick Berg in April, has had a $25m (£14m) bounty placed on his head by the US.

But the demands have puzzled British officials. The UK is no longer holding any women prisoners. The US admits to only two, including Rihab Rashid Taha, the microbiologist nicknamed "Dr Germ" for her role in developing Saddam Hussein's biological weapons programme.

Originally from the Liverpool area, Mr Bigley is the third Briton to have been kidnapped in Iraq. In April, Gary Teeley, 37, from Woolwich, south-east London, was taken hostage by local militiamen as he left a US base. After six days of negotiations involving local Arab tribes, he was released to Italian peace-keepers.

Last month, the British freelance reporter James Brandon was abducted by Shia gunmen in Basra. He was released after two days following the intervention of the radical Shia cleric Muqtada al-Sadr.

Like thousands of expats in the Middle East, Mr Bigley had lived a relatively affluent lifestyle as a contractor in the Gulf area for some years. Attracted by tax-free employment, they take up lifestyles that are out of reach in Britain. His firm, the US-owned Gulf Supplies and Construction Services, had contracts to maintain US military equipment and bases in Iraq.

Alarmed by the seriousness of the threat to Mr Bigley, the Foreign Office is playing a deliberately low-key strategy while diplomats and intelligence officers in Iraq attempt to secure his release. On Friday, after his capture was first confirmed, his family in the UK had said they were "devastated to find that Ken had been taken". Apart from confirming that his family had recognised Mr Bigley from the video footage, no other statements were issued yesterday on their behalf.

"It's not pleasant seeing it on the television, and we have been in touch with the family," said one official. "We can't give any other details. We will be talking to whoever we have to talk to, to try and sort this out. Who that will be in particular, we can't say."

However, British diplomats are aware of one harsh fact: Mr Bigley's kidnappers are far less open to negotiation than many others in Iraq. Their threats are taken very seriously indeed.

Additional reporting by Chris Burgess