Prime Minister David Cameron's Conservatives win could redefine Britain's future in Europe and herald more austerity cuts.
Prime Minister David Cameron's Conservatives looked on course Friday for a surprise victory in Britain's General Election which could redefine the country's future in Europe and herald more austerity cuts.
As the results rolled in, forecasts of a close contest with the opposition Labour party turned out to be wide of the mark, with Cameron on course to win a majority in parliament and secure five more years in Downing Street.
In Scotland, the nationalist surge also proved larger than expected as the pro-independence Scottish Nationalist Party (SNP) won 56 out of 59 seats when the final results came in, almost entirely wiping out the Labour party north of the border.
"This is clearly a very strong night for the Conservative party," Cameron said after being re-elected to his Witney seat in southern England.
A few hours later, he returned to Downing Street with his wife Samantha and his office confirmed that he intended to pay a visit to Queen Elizabeth II at Buckingham Palace at 12:30pm (1130 GMT), where he is expected to be reconfirmed as premier and asked to form a new government.
Cameron said Britain now "must hold" a referendum on membership of the European Union that he has promised by 2017, raising the prospect that the country could leave the bloc.
The election is an endorsement of Cameron's austerity programme and is likely to see a continuation of cuts to public spending as he seeks to reduce a budget deficit of nearly £90 billion (120 billion euros, $140 billion).
The pound rallied on the currency markets as investors welcomed a clear result, analysts said.
The London stock market surged on the election results, with the benchmark FTSE 100 index rising 1.88 per cent in initial deals, to 7,016 points.
Labour leader Ed Miliband admitted it had been "a very disappointing and difficult night" for his centre-left party, which was ousted by Cameron in 2010.
"We haven't made the gains we wanted in England and Wales, and in Scotland we have seen a surge of nationalism overwhelm our party," he said.
Labour finance spokesman Ed Balls was among those who lost his seat in a night of losses that now raise questions about Miliband's leadership.
The party lost 40 seats in Scotland to an SNP landslide, who saw the election among others of 20-year-old Mhairi Black, Britain's youngest MP since 1667.
It was also a terrible night for the centrist Liberal Democrats, junior partners in Cameron's coalition, who lost at least two senior ministers and were projected to lose 47 of their 57 seats.
Their leader, deputy prime minister Nick Clegg, managed to hold his seat but said the party had suffered a "cruel and punishing" night and hinted he could step down.
Consequences for EU
The success of the SNP could increase pressure for a fresh referendum on Scottish independence, even though that was rejected just last September by 55 per cent of voters.
"It is an extraordinary statement of intent from the people of Scotland. The Scottish lion has roared this morning across the country," former SNP leader Alex Salmond said, as he was elected to the northeastern seat of Gordon.
Current leader Nicola Sturgeon has refused to discuss whether a new referendum may now be on the cards.
But some experts suggest the issue could come to the fore again if there is a referendum on Britain leaving the EU.
Under pressure from the eurosceptic wing of his Conservative party and the anti-EU UK Independence Party, Cameron had promised to renegotiate Britain's position in Europe and put the new settlement to voters within the next two years.
In Tokyo afternoon trade, sterling fetched $1.5500 against $1.5262 in New York.
"The Conservative Party are perceived to be more market-friendly than a Labour government and that's really at the core of the game," said Sebastien Galy, a currency strategist at Societe Generale bank.
"Having said that, with a Conservative government, some people will reassess" their positions longer-term owing to the increased risk of Britain exiting the EU, he added.
UKIP had hoped to make gains in Thursday's election, but in the end lost one of two seats.
Party leader Nigel Farage is contesting another, in South Thanet in Kent, southeast England, but the result is not due until mid-morning.
In other results, the Green party held its single seat in Brighton, a town on the southern English coast.