Britain's opposition Conservatives came top in a knife-edge election but without a clear-cut majority, exit polls and partial results suggested on Friday, threatening to plunge Britain into political limbo.
While the Conservatives insisted voters had "rejected" the ruling Labour party, a key ally of Prime Minister Gordon Brown indicated the party will seek to cling on to power in a deal with the third party the Liberal Democrats.
"The rules are that if it's a hung parliament, it's not the party with the largest number of seats that has first go -- it's the sitting government," said Business Secretary Peter Mandelson.
When asked about whether Labour could form an alliance with the Liberal Democrats to stay in power, Mandelson told Sky News television: "You don't have to sound quite so horrified. Obviously we would be prepared to consider that."
Brown himself, while saying it was too early to say definitively, appeared to indicate he wanted to stay in power, raising the possibility of several days of horse-trading.
"The outcome of this country's vote is not yet known but my duty to the country coming out of this election is to play my part in Britain having a strong, stable and principled government," he said.
But Conservative finance spokesman George Osborne, while stopping short of claiming victory, said that Labour had lost all claim to the highest office.
"It's pretty clear that Labour cannot continue in government," he told the BBC. "They need to get real. They've been rejected by the British people and Britain needs a change of government."
The Conservatives were in line to win 305 seats -- 21 short of an overall majority of 326 in the 650-seat House of Commons -- against 255 for the Labour party and 61 for the Liberal Democrats, according to exit polls.
If confirmed, the exit forecast would leave Britain with a so-called "hung parliament" for the first time since 1974.
The Lib Dems, Britain's centrist third party led by Nick Clegg, look poised to emerge as kingmakers, even though the exit poll forecast a much lower number of seats for the party than had been predicted during the campaign, when its fortunes surged.
With a little over 10 per cent of results in at 2:00 am (0100 GMT), Labour had 34 seats, the Tories 20 and the Lib Dems four.
One notably political casualty was Northern Ireland First Minister Peter Robinson, who lost his London parliamentary seat for the East Belfast constituency, after a sex and cash scandal involving him and his wife.
Sterling and British government bonds rallied -- London's LIFFE futures exchange opened over six hours early to satisfy huge election night demand -- although sterling had initially fallen.
The Conservatives' Kenneth Clarke, a former finance minister, warned that markets were watching Britain closely.
"The key thing is to produce a strong and stable government which we particularly we need," he said.
"Quite a lot of rather sharp traders will be placing their bets on whether or not Britain is capable of producing a strong and sensible government."
More than 45 million voters were eligible to cast ballots, with observers predicting turnout could be as high as 70 per cent after an unusual campaign transformed by the first televised leaders' debates in a British election.
The polls were marred by a number of protests by voters prevented from casting their ballots in cities including London, Leeds and Sheffield because they were still queuing at 10:00 pm when polling stations closed. Some commentators took this as a sign of a high turnout.
Justice Secretary Jack Straw said legal challenges could not be ruled out, while the Electoral Commission watchdog said it would carry out a "thorough review" of what had happened in constituencies where people could not vote.
Election day itself had been marked by a plane crash which injured a high-profile anti-Europe candidate and a protest outside the polling station where Cameron voted.
Nigel Farage of the eurosceptic UK Independence Party (UKIP) suffered minor head injuries and needed heart tests after the light aircraft he was travelling in crashed at an airfield in Northamptonshire.
Exit polls have a mixed track record of accurately predicting the outcome of British general elections in recent years. Forecasts in the last close race in 1992 were a long way out but in the last election in 2005 they proved correct.