SANAA (Reuters) - More than 40 Yemenis were killed in pitched street battles in the capital on Thursday as fighting aimed at ending President Ali Abdullah Saleh's three-decade-long rule threatened to ignite civil war. Residents were hurriedly strapping furniture, stoves, baby cots and other possessions to the roofs of cars and trucks and streaming out of Sanaa by the thousands, hoping to escape the violence that has killed more than 80 people since Monday. The fighting, pitting the security forces of President Ali Abdullah Saleh against members of the country's most powerful Hashed tribe led by Sadiq al-Ahmar, was the bloodiest Yemen has seen since protests began in January. The defence ministry said 28 people were killed in an explosion in an arms storage area of Sanaa at dawn on Thursday. Fighters in civilian clothes roamed some districts and machinegun fire rang out sporadically. Sporadic explosions could be heard in the capital near the protest site where thousands of people demanding Saleh to leave after nearly 33 years in power are still camped. Black smoke from mortar fire mixed with a haze of pollution and dust that hangs over Sanaa like a shroud. Britain said it was reducing staffing at its embassy in Yemen because of the violence. Washington also told all non-essential diplomats and embassy family members to leave. "In light of the deteriorating situation, I have today decided to reduce the staffing of our embassy to a level sufficient only to work on the most pressing and vital British national interests in Yemen, by temporarily removing four members of our staff," Foreign Secretary William Hague said. The United States and Saudi Arabia, both targets of foiled attacks by a wing of al Qaeda based in Yemen, have tried to defuse the crisis and stem any spread of anarchy that could give the global militant network more room to operate. There are worries that Yemen, already teetering on the brink of financial ruin, could become a failed state that would undermine regional security and pose a serious risk to its neighbour Saudi Arabia, the world's biggest oil exporter. "We deplore the fighting that occurred overnight which was a direct result of the current political impasse, for which President Saleh has direct responsibility due to his refusal to sign the GCC transition agreement," a French Foreign Ministry spokesman said, referring to the Gulf Cooperation Council. Hillary Clinton said in Paris: "We continue to support the departure of President Saleh who has consistently agreed that he would be stepping down from power and then consistently reneged on those agreements." Yemen's state prosecutor ordered the arrest of "rebellious" leaders of the tribal group led by the al-Ahmar family and a government official said the headquarters of an opposition television station had been "destroyed," without giving details. Tribal leader Ahmar told Reuters there was no chance for mediation with Saleh and called on regional and global powers to force him out before the Arabian Peninsula country of 23 million people plunges into civil war. "Ali Abdullah Saleh is a liar, liar, liar," said Ahmar, leader of the Hashed tribal federation. "We are firm. He will leave this country barefoot." Saleh said on Wednesday he would not bow to international "dictates" to step down and leave Yemen despite mounting protests and international pressure. With fighting now escalating after a tense but mostly contained standoff between Saleh's supporters and opponents, panic has begun to grip the capital. There were long queues at Sanaa bakeries, banks and petrol stations as residents tried to stock up on cash and food before fleeing to safer areas in the impoverished state. "I'm going to Hudaida, I can't stay anymore after what happened last night. That was crazy. We are civilians and want to live in peace," said Hani Zobeidi, a civil servant with five children. He had taken a month's leave from work. Broken glass, bloodstained corridors and a makeshift clinic for the wounded attested to the damage at Ahmar's mansion. A government official had said the airport was briefly closed due to the fighting but had reopened. The most recent bout of fighting erupted a day after Saleh pulled out for the third time from a deal mediated by Gulf Arab neighbours for him to quit and make way for a unity government. Pressure has been mounting since February, when protesters inspired by democratic revolutions in Tunisia and Egypt began camping in squares and marching in their hundreds of thousands to call for Saleh to go. His attempts to stop the protests by force have so far claimed the lives of 260 people. The coalition of opposition parties that has sided with protesters and was due to sign the Gulf deal held an emergency meeting on Thursday over what it called Saleh's "insistence on dragging Yemen towards civil war." "We call on President Saleh to stop the fighting and answer the demand of the Yemeni people for an immediate and urgent abdication of power," the coalition said in a statement. Saleh said on Wednesday he would make no more concessions to those seeking his departure. But the capital of the country of 23 million has begun to feel like a city at war. Witnesses and officials said supporters of Ahmar, head of the Hashed tribal federation to which Saleh's Sanhan tribe also belongs, controlled several ministry buildings near Ahmar's compound including the trade and tourism ministries, as well as the offices of the state news agency Saba. At the protest camp, demonstrators voiced concern at the turn of events and what they described as Saleh's readiness to go to civil war rather than step down. "The Ahmar family are part of the revolution and the president is trying to turn it into civil war," said Ahmed al-Malahi, a 39-year-old medical doctor. "This president has oppressed us ... All the government revenues and all the foreign aid to Yemen are going straight to their pockets." Most said they were determined to continue their protests because they saw no future for their children under Saleh. "He crushed our future and we accepted our lot but we want to save the future of our sons," said Mohammed al-Jaradi, 50, a retired soldier. "This is why we will not back down."