May pledges minority government after UK election debacle on eve of Brexit talks

British Prime Minister Theresa May said she would form a government backed by a small Northern Irish party after her Conservative Party lost its parliamentary majority in an election days before launching talks on Britain's EU departure.

A stony-faced May, speaking on the doorstep of her official Downing Street residence, said on Friday the government would provide certainty and lead Britain in talks with the European Union to secure a successful Brexit deal.

But with her authority diminished, May risks facing more opposition to her Brexit plans from both inside and outside her Conservative Party, and some colleagues may be lining up to replace her.

"She's staying, for now," a party source told Reuters.

May said she could rely in parliament on the support of her "friends" in Northern Ireland's Democratic Unionist Party (DUP) after her governing Conservatives failed to emerge as clear winners. The DUP said only that it would enter talks.

"The prime minister has spoken with me this morning and we will enter discussions with the Conservatives to explore how it may be possible to bring stability to our nation at this time of great challenge," Democratic Unionist Party leader Arlene Foster told reporters.

Confident of securing a sweeping victory, May had called the snap election to strengthen her hand in the European Union divorce talks. But in one of the most sensational nights in British electoral history, a resurgent Labour Party denied her an outright win, throwing the country into political turmoil.

EU leaders expressed fears that May's shock loss of her majority would delay the Brexit talks, due to begin on June 19, and so raise the risk of negotiations failing.

"Do your best to avoid a 'no deal' as result of 'no negotiations'," Donald Tusk, leader of the EU's ruling council, wrote in a tweet.

With 649 of 650 seats declared, the Conservatives had won 318 seats and Labour 261 followed by the pro-independence Scottish National Party on 34.

May's left-wing Labour rival Jeremy Corbyn, once written off by his opponents as a no-hoper, said May should step down and he wanted to form a minority government.

But May, facing scorn for running a lacklustre campaign, was determined to hang on. Just after noon, she was driven the short distance from Downing Street to Buckingham Palace to ask Queen Elizabeth for permission to form a government - a formality under the British system.

The pound hit an eight-week low against the dollar and its lowest levels in seven months versus the euro before recovering slightly on news she would form a DUP-backed government.

The centre-right DUP's 10 seats are enough to give the Conservatives a fragile but workable partnership.

"Our two parties have enjoyed a strong relationship over many years and this gives me the confidence to believe that we will be able to work together in the interests of the whole United Kingdom," May said.

This was likely to involve an arrangement in which the DUP would support a Conservative minority government on key votes in parliament but not form a formal coalition.

With the complex talks on the divorce from the EU due to start in 10 days, it was unclear what their direction would now be and if the so-called "Hard Brexit" taking Britain out of a single market could still be pursued.

After winning his own seat in north London, Corbyn said May's attempt to win a bigger mandate had backfired.

"The mandate she's got is lost Conservative seats, lost votes, lost support and lost confidence," he said. "I would have thought that's enough to go, actually, and make way for a government that will be truly representative of all of the people of this country."

Corbyn would be unlikely to win backing for a minority government, but was clearly revelling in a storming performance after pundits had pronounced the Labour Party all but dead.

BREXIT RISKS

"We need a government that can act," EU Budget Commissioner Guenther Oettinger told German broadcaster Deutschlandfunk. "With a weak negotiating partner, there's a danger that the (Brexit) negotiations will turn out badly for both sides."

The EU's chief negotiator said the bloc's stance on Brexit and the timetable for the talks were clear, but the divorce negotiations should only start when Britain is ready. "Let's put our minds together on striking a deal," Michel Barnier said.

But there was little sympathy from some other Europeans.

"Yet another own goal, after Cameron now May, will make already complex negotiations even more complicated," tweeted Guy Verhofstadt, the former Belgian premier who is the European Parliament's point man for the Brexit process.

May's predecessor David Cameron sought to silence eurosceptic fellow Conservatives by calling the referendum on EU membership. The result ended his career and shocked Europe.

German conservative Markus Ferber, an EU lawmaker involved in discussions on access to EU markets for Britain's financial sector, was scathing.

"The British political system is in total disarray. Instead of strong and stable leadership we witness chaos and uncertainty," he said, mocking May's campaign slogan.

"A working government is needed as soon as possible to avoid a further drop in the pound," said ING currency strategist Viraj Patel in London.

"DREADFUL CAMPAIGN"

Conservative member of parliament Anna Soubry was the first in the party to disavow May in public, calling on the prime minister to "consider her position".

"I'm afraid we ran a pretty dreadful campaign," Soubry said.

May had unexpectedly called the snap election seven weeks ago, even though no vote was due until 2020. At that point, polls predicted she would massively increase the slim majority she had inherited from Cameron.

May had spent the campaign denouncing Corbyn as the weak leader of a spendthrift party that would crash Britain's economy and flounder in Brexit talks, while she would provide "strong and stable leadership" to clinch a good deal for Britain.

But her campaign unravelled after a policy u-turn on care for the elderly, while Corbyn's old-school socialist platform and more impassioned campaigning style won wider support than anyone had foreseen.

In the late stages of the campaign, Britain was hit by two Islamist militant attacks that killed 30 people in Manchester and London, temporarily shifting the focus onto security issues.

That did not help May, who in her previous role as interior minister for six years had overseen cuts in the number of police officers. She sought to deflect pressure onto Corbyn, arguing he had a weak record on security matters.

"What tonight is about is the rejection of Theresa May's version of extreme Brexit," said Keir Starmer, Labour's policy chief on Brexit, saying his party wanted to retain the benefits of the European single market and customs union.

Analysis suggested Labour had benefited from a strong turnout among young voters.