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A man lights a cigarette outside the UKIP (UK Independence Party) offices in Eastleigh, southern England February 28, 2013. Voters in Eastleigh voted for a new MP on Thursday, following the resignation of Lib Dem politician Chris Huhne.LUKE MACGREGOR/Reuters

British Prime Minister David Cameron has suffered a major blow in a critical by-election south of London, raising questions about his future as leader of the Conservative Party.

The Conservatives finished third in Eastleigh, a middle-class riding southwest of London. Tories came behind the upstart UK Independence Party (Ukip), and the Liberal Democrats, which hung on to the seat despite scandals involving the outgoing MP, Chris Huhne, and the party's former chief executive, Chris Rennard.

The Liberal Democrats received 13,342 votes, Ukip 11,571 and the Conservatives 10,559.

Eastleigh was seen as the kind of riding the Conservatives had to win if the party has any hope of forming a majority government after the next general election in 2015. The Conservatives are currently in a coalition government with the Liberal Democrats and relations between the parties have been strained. The Tories finished second in Eastleigh in the last election in 2010, behind Mr. Huhne, who resigned last month after pleading guilty to perverting the course of justice in a case involving a speeding ticket.

Mr. Cameron visited the riding twice along with just about every cabinet minister and other prominent Tories, such as London Mayor Boris Johnson. However, the party's candidate, Maria Hutchings, became something of a loose cannon during the campaign, frequently taking opposite positions to Mr. Cameron on party policies.

For Ukip and its colourful leader, Nigel Farage, the results clearly signal that the party is now a major challenger to the Conservatives. Ukip campaigned largely on a platform devoted to getting Britain out of the European Union and reforming immigration, issues that have resonated as the British economy slowed. Although it has been around for 30 years, Ukip has never elected an MP and received only marginal support in previous general elections. The party won only 4 per cent of the vote in Eastleigh in the 2010 election, but it was polling as high as 21 per cent in the final days of the recent by-election campaign.

Mr. Cameron has already been under pressure from members of his caucus over the government's decision to approve gay marriage and his support for Britain's continued membership in the EU (although he has promised to renegotiate the terms of Britain EU membership and hold a referendum on the results of those negotiations). Losing to Ukip will be seen as a crippling blow. Earlier this week, David Davis, a senior Tory and former leadership candidate, predicted a crisis if the Tories finished behind Ukip.

Liberal Democrat Leader Nick Clegg, who is also Deputy Prime Minister, will be breathing a sigh of relief at the victory. The party has been plummeting in the polls nationally and its members had been growing increasingly uncomfortable with the coalition government. A loss in Eastleigh could have threatened Mr. Clegg's position, especially since the local council is dominated by Liberal Democrats.

As for the Labour Party, the by-election result will not be encouraging. Although Labour was not expected to win, the party had hoped for a strong showing to demonstrate that its support is not largely confined to the north. Labour finished a distant fourth, with 4,088 votes, after coming third in 2010. The party's candidate, John O'Farrell, had faced criticism over comments he made in books written years ago about wishing Margaret Thatcher had been killed in a bomb blast and wanting Britain to lose the Falklands War.

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