Theresa May’s gamble on a snap election has dramatically backfired after her quest for a “stronger mandate” to deliver Brexit ended up in the humiliation of a hung parliament, leaving her future as prime minister in doubt.

The Conservatives emerged as the biggest party but are projected to fall eight seats short of an overall majority; leaving the Tories trying to form a minority government.

A visibly shaken Mrs May said during the night the Conservative party would “fulfil its duty” to ensure stability as the start of Brexit negotiations loom later this month. “The country needs a period of stability,” she said after winning her constituency in Maidenhead.

However, senior Conservative figures said she might be forced to quit and Tory MP Anna Soubry said the prime minister should “consider her position” after running “a disastrous campaign”.

With three seats left to be declared, Mrs May’s Conservatives were projected to win 319 seats, Labour 261, the Scottish National Party 35 and the Liberal Democrats 13. In the outgoing parliament, the Tories had 331 seats; a governing party needs 326 out of 650 seats for a majority.

In addition to Mrs May’s shocking loss of seats, the other big loser of the night was in Scotland, where the SNP saw its total drop from 54 seat in a night of drama with botht the party’s leader in Westminster, Angus Robertson, and Alex Salmond, former SNP leader, losing their seats as the nationalist tide receded.

Ruth Davidson, Tory leader in Scotland, said heavy SNP losses meant a second independence referendum was now “dead”.

The prime minister appeared shattered by the UK result. Speaking after winning her Maidenhead seat, her voice cracking, Mrs May said that the Conservatives appeared to have won the most seats and votes and would seek to govern.

But Labour leader, Jeremy Corbyn, celebrated a night of progress for his party and called on Mrs May to resign. “The mandate she has got is lost Conservative seats, lost votes, lost support and lost confidence,” he said.

George Osborne, former chancellor, said: “Clearly if she’s got a worse result than two years ago and is almost unable to form a government then I doubt she will survive in the long term as Conservative party leader.”

Investors rapidly sold off sterling in Asian markets when the exit polls were declared. After a volatile trading, the pound is down 2.1 per cent at $1.2682, taking it back to the middle of its trading range on April 18, when Mrs May called the election.

London’s FTSE 100 has opened up 0.6 per cent at 7,497.0. The main London index is home to a series of multinational companies which benefit from a weaker pound, which makes exports more competitive and flatters earnings made in foreign currency when translated back into sterling.

The result could lead to a period of instability at Westminster, with speculation there may have to be a second general election, throwing into confusion Brexit negotiations which are due to begin in just over a week.

Guy Verhofstadt, the European Parliament’s chief Brexit negotiator, tweeted: “Yet another own goal, after Cameron now May, will make already complex negotiations even more complicated.”

David Davis, Brexit secretary, said the Tories had presented the voters with a policy of leaving the customs union and single market. “We will see whether they have accepted it or not,” he said.

Some Tory MPs have argued the “hard Brexit” strategy will have to be re-examined and the uncertain election result prompted some calls on Friday night for exit talks to be put on hold.

Labour outperformed most expectations as younger voters turned out in large numbers, vindicating Jeremy Corbyn’s energetic campaign and leftwing agenda. For the first time since 1970, the two big political parties both garnered more than 40 per cent of the vote each.

Mr Corbyn’s party performed strongly in the south, especially in London, while Mrs May’s stuttering campaign failed to deliver the big Tory wins in the Midlands and North that had been widely predicted.

Labour took slew of southern seats from the Conservatives, including Enfield Southgate, Gower, Croydon Central, Brighton Kemptown and Bedford. At least five Tory ministers lost their seats, including Ben Gummer, Cabinet Office minister, who wrote the election manifesto.

John McDonnell, shadow chancellor, said Labour would seek to form a minority government, rejecting coalition deals.

“We will put ourselves forward to serve the country and form a minority government,” he said. “The reason for that is I don’t think the Conservative party is stable. I think she’s a lame duck prime minister. I can’t see her surviving.”

The Ukip vote collapsed, but many of the party’s supporters turned to Labour rather than the Conservatives, in spite of Mrs May’s attempt to present herself as the only person able to deliver Brexit.

Labour also won the Sheffield Hallam seat of Nick Clegg, the former Liberal Democrat deputy prime minister, while Vince Cable regained Twickenham for the Lib Dems.

The only bright spot for Mrs May on a night of humiliation was a strong Conservative performance in Scotland. Along with Mr Salmond, Angus Robertson, the SNP’s leader at Westminster, lost his seat on a dismal night for the nationalist party.

Mrs May is expected to try to form a government, possibly relying on about 10 Northern Ireland unionist MPs to bolster her position. But Ed Balls, former Labour minister, said of the exit poll: “If this is correct, there will be a second election soon.”

In the early hours of Friday the Conservative party was gripped with speculation that Mrs May could be forced to step down, possibly opening the door to another leadership bid by foreign secretary Boris Johnson.

Meanwhile, Mr Corbyn was credited with running a passionate and authentic old-style socialist campaign and has cemented his position as party leader. The question now facing moderate Labour MPs is whether to fall in behind a leader whom they tried to oust less than a year ago.

Mrs May’s campaign was ill-starred and was twice interrupted by terrorist incidents. After the second attack, on London Bridge, she faced questions over the cuts to police numbers made on her watch as home secretary.

The U-turn over a Tory manifesto commitment to reform social care — dubbed a “dementia tax” — shook the faith of Conservative MPs in the party leader and prompted one minister to call it a “monstrous mistake”.