Coalition will continue, say Cameron and Clegg

The Deputy British Prime Minister admitted the results were "a bitter blow" for Lib Dems, but insisted his party would "pick ourselves up, dust ourselves off and move on".

Grassroots calls for Mr Clegg to be removed as leader were quickly slapped down by senior Lib Dem figures at Westminster, including his deputy Simon Hughes, who said he was "personally and politically as strong as when he joined the Government".

Despite some calls from the Tory backbenches for the coalition to be brought to an early end, Mr Cameron made clear he intends it to run its full five-year term.

The British Prime Minister accepted the referendum campaign had been "difficult" for his government, but he added: "The coalition agreement set out that we were going to ask the British people a very straightforward question and they have given the most clear and resounding answer.

"I believe that what the British people want us to do now is to provide a good, strong, decisive Government in the long-term national interest of this country, Conservatives and Liberal Democrats working together.

"That is what we have been for this last year and that is what we are going to be for the rest of this Parliament."

Responding to the AV vote, Mr Clegg said: "This is a bitter blow for all those people - like me - who believe in the need for political reform.

"But the answer is clear and the wider job of the government and the Liberal Democrats in government will continue - to repair the economy, to restore a sense of prosperity and jobs and optimism to the country. That's the job that we have started and we will see it through.

"Clearly this has been a really disappointing day and we have had a lot of very disappointing results overnight, but we are going to pick ourselves up, dust ourselves off and move on."

After all the 440 referendum results had been declared, 13 million people (67.9%) had voted to keep the first-past-the-post system to elect MPs, against 6.1 million (32.1%) backing the alternative vote.

With results available from 279 English councils, Labour had gained 839 seats and 26 councils, while Conservatives had increased their tally of councillors by 94 and the Lib Dems had lost 752.

Labour was licking its wounds in Scotland, where leader Iain Gray announced he would step down after a remarkable performance by the Scottish National Party sent Alex Salmond back to Holyrood for a second term as First Minister, this time with an overall majority.

Mr Miliband - who backed AV despite the opposition of more than half of his MPs and many Labour grandees - insisted the party's strong showing in English councils and the Welsh Assembly showed it was "coming back" after its woeful performance in last year's general election.

"I'm disappointed that we lost the AV referendum but I think the people have spoken very clearly on this issue and it is a verdict that I accept," said the Labour leader.

There was no doubt that Liberal Democrats were the big losers. The party lost 12 of its 17 MSPs at Holyrood and the bulk of its councillors in former big city strongholds like Sheffield, Hull and Liverpool.

Gary Long, leader of the Lib Dem group on Nottingham City Council, where the party suffered a total wipeout, called on Mr Clegg to step down.

"I'm in favour of the coalition but I think he's run it very badly and in my view he should resign immediately," he said.

Simon Hughes indicated that the Lib Dems will now assert their independence in Government by extracting concessions from their coalition partners on issues like House of Lords reform and the expansion of private healthcare provision in the NHS.

"NHS reform is absolutely the area that is now in the front line," said the Lib Dem deputy leader. "It is absolutely clear that what has been proposed in (Health Secretary) Andrew Lansley's Bill is not what was agreed in the coalition agreement and is not what our party members and supporters have agreed to.

"That will be changed and if it is not sufficiently changed it will not happen."