Nigel Farage’s Brexit Party has failed in its first attempt to put an MP in the House of Commons after Labour held off a strong challenge to pull off a surprise victory in the Peterborough by-election.

The Brexit Party was widely predicted to win the poll and gain its first MP.

But Labour’s Lisa Forbes managed to mobilise supporters and retain the seat for Jeremy Corbyn’s party, beating Mike Greene into second place by 10,484 votes to 9,801 – a majority of 683.

Forbes called her victory “significant”, because “it has shown that the politics of hope can win regardless of the odds”.

And Corbyn said the result showed voters have rejected austerity and the government’s handling of Brexit, with the Tories languishing in third place on 7,243.

Farage hailed a “massive result” despite defeat, declaring the end of two party politics and urging Tory supporters to vote tactically to deliver Brexit.

“We came a very, very close second,” he told BBC Radio 4′s Today programme.

“But here’s the important thing: eight weeks ago today the Brexit Party launched.

“What you have seen from this result last night is that British politics has fundamentally changed, it is no longer just two parties contesting.”

Labour’s vote share fell by more than 17 percentage points from the 2017 general election while that of the Conservatives was down by more than 25 percentage points.

The Brexit Party captured a 29% share of the vote, while Labour had 31%.

The Liberal Democrats were fourth with 4,159, while the Greens came fifth with 1,035 votes.

The by-election was triggered after ex-Labour MP Fiona Onasanya lost her seat through a recall petition after serving time in prison for lying about a speeding offence.

Forbes said: “The people of Peterborough have placed their trust in me and I will not let you down.

“I promise to work tirelessly for Peterborough to make it a city that we can all be proud of and that work starts now.”

Corbyn added: “Peterborough has shown clear support for Labour’s programme to end austerity and invest in services and communities, rejecting a decade of Tory cuts and their disastrous handling of Brexit. In this key seat, the Conservatives have been pushed to the margins.

“This result shows that in spite of the divisions and deadlock over Brexit, when it comes to a vote on the issues that directly affect people’s lives, Labour’s case for real change has strong support across the country.”

But the defeated Brexit Party candidate Greene said they could not match Labour’s organisation on the ground.

“Two parties have been ruling this country for decades. That is not happening anymore. We were ahead of the Tories, only 683 votes behind Labour,” he told Sky News.

“They have decades of data. We had nothing just four weeks ago. We did not have the vote numbers they had. We didn’t have the voting history they have.

“We will be back. Let’s see what does happen in the next general election.”

Among local Tory activists there was frustration that the continuing turmoil over Brexit meant they were unable to take advantage of Labour’s difficulties.

The chairman of the Peterborough Conservative Association Wayne Fitzgerald said it was now essential the party committed to taking Britain out of the EU, even if it meant no deal.

“Parliamentarians in Westminster are against the will of the people,” he told Sky News.

“The Conservatives must de-select every MP who will not accept a WTO (World Trade Organisation) Brexit if it comes to that.

“If Boris (Johnson) or whoever is leader doesn’t do that, Mr Farage will sweep to 450 seats in the next general election.”

Former Brexit minister David Jones gave a succinct assessment of the by-election result.

The Tory MP tweeted: “Message from Peterborough: no Brexit = Corbyn.”

Tory party chairman Brandon Lewis said the election sent a “very clear message” alongside the European elections, which Farage’s party won, that “people want to see us deliver on what they voted for in 2016 and that’s something we as parliamentarians across government and across parliament need to be alert to and get the job done”.

He added: “The reality is we’re nine years into being in government, no party in history pretty much has ever won a seat from the opposition nine years in.”

Peterborough voted 61-39% to Leave in the 2016 referendum.

But Onasanya narrowly won the seat from Brexiteer Tory Stewart Jackson in the 2017 snap general election.

And Remainers who backed the Liberal Democrats or Greens in the European elections appeared to have come back to Labour in an effort to block Farage’s party from gaining a seat at Westminster.