With every seat now possibly crucial to the arithmetic of a hung parliament, the Labour and Tory leaders were closeted with their inner circles watching results come in and discussing the way ahead. Mr Brown went straight to his first-floor office suite at Labour HQ, accompanied by his wife Sarah and Lord Mandelson.

Transport Secretary Lord Adonis - a former Lib Dem councillor, who has been tipped to play a key part in coalition talks - denied negotiations had already begun.

He said: "Obviously we will now be in discussion with the other parties. The constitution is clear that Gordon Brown has the first opportunity to form that government. "But we shouldn't prejudge the final outcome."

He said the talks would have to start soon but denied they were already under way. Mr Cameron also retreated into talks with close colleagues and aides and was not expected to emerge from party HQ again before noon at the earliest.

David Cameron earlier insisted Labour had "lost its mandate to govern our country", as his party raced ahead in terms of seats won in the new parliament. But he looked set to fall just short of the 326 seats he needs for an overall majority in the Commons.

With more than 275 seats won so far, the Conservatives look likely to be the largest party in the next Parliament, but without an overall majority.

Liberal Democrat leader Nick Clegg held his Sheffield Hallam seat, taking more than 50 per cent of the vote.

Many of Labour's big names have lost their seats, including former Home Secretary Jacqui Smith, who was defeated in the polls by the Conservative candidate in her former Redditch constituency.

Another former Home Secretary Charles Clarke has also lost his Norwich South seat to the Lib Dems. Other big names to lose out on re-election include Communities Minister Shahid Malik, Defence Minister Bill Rammell and Health Minister Mike O'Brien.

The BBC/ITV News/Sky News survey forecast the Conservatives would win 305 seats - 21 short of a majority - with Labour on 255 and the Lib Dems on 61.

With 572 results in, that prediction looks to be in line with actual voting.

Mr Brown told constituents at his Kirkcaldy and Cowdenbeath count: "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, able to lead Britain into sustained economic recovery."

Downing Street sources said Mr Brown would insist on his right as Prime Minister to try to form an administration even if he did not command the largest party in the Commons.

They said his view was that a majority coalition government would be better at a time of economic uncertainty than a minority administration.

But Mr Cameron told supporters at his count in Witney: "I believe it's already clear that the Labour government has lost its mandate to govern our country.

"I can see also that the Conservative Party is on target to win more seats at this election than we have done at any election in perhaps as long as 80 years."

He added: "What's clear from these results is that the country, our country, wants change. That change is going to require new leadership and we will stand ready to do all we can to help bring that leadership."

Mr Cameron, foreshadowing extensive wrangling over who would form an administration, promised to put the national interest first in the "hours ahead, or perhaps longer than the hours ahead".

Senior Cabinet ministers stressed that deals with the Liberal Democrats were now on the cards as a cliffhanger election unfolded.

But if the exit poll is right, a simple Labour-Lib Dem pact would still not be enough to secure an overall majority, so other parties would also need to be courted.

As the rollercoaster night of results began to unfold, Labour election supremo Lord Mandelson made plain Labour would seek to stay in office. The Business Secretary told BBC News: "The constitutional conventions are very clear. "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."

Pressed on whether Labour would seek to do a deal with the Lib Dems to try to hold on to power, he said: "I have no problem in principle in trying to supply this country with a strong and stable government." He added that it looked as if the country was heading for a "cliffhanger of a result".

The Conservatives picked up two high-profile scalps as seats showed some sharp swings to the Tories - but with the overall picture still clouded in uncertainty after nearly a third of seats had declared. They ousted prominent Lib Dem Lembit Opik in Montgomeryshire, with a 13.2% swing to the Conservatives, and Cabinet Office minister and the Prime Minister's former parliamentary aide Angela Smith from Basildon South with a 7.5% swing.

Mr Brown and Mr Cameron began the journey back to London after their counts, where the next stage of the drama will be played out.

Frantic behind-the-scenes talks will dominate the morning if the exit poll is right and the Tories have failed to secure an overall majority.

And although Mr Clegg may be disappointed at the night's results, he may yet be able to secure a referendum on full-blown proportional representation as the price of his support of either of the two other parties.