UPDATE 7-Brown's party routed in UK elections, loses London

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By Tim Castle and Katherine Baldwin

LONDON, May 2 (Reuters) - Britain's Labour Party suffered its worst local election defeat on record and lost control of London on Friday, forcing Prime Minister Gordon Brown to rethink his strategy to avoid losing the next national poll.

Conservative Boris Johnson, a journalist-turned-lawmaker prone to gaffes, wrested the prized post of London mayor from Labour's maverick Ken Livingstone, who has run the sprawling metropolis of some 7.5 million people since 2000.

The election results were a major blow to Brown, who enjoyed a brief honeymoon with voters after he took over from Tony Blair, but has since been beset by economic turmoil, industrial unrest, administrative blunders and an image problem.

Contrite Labour ministers and lawmakers said the government had failed to address Britons' fears of rising food and energy prices, higher mortgages and a possible housing market slump.

The question now is whether the rout was just mid-term blues from which Labour can recover before the next general election, due by mid-2010 at the latest, or whether the tide has turned towards the Conservatives.

Accepting the post, Johnson said he hoped his victory represented a turning point for the party which has been in opposition since Blair swept to power in 1997.

"I do not for one minute believe that this election shows that London has been transformed overnight into a Conservative city but I do hope it does show that the Conservatives have changed into a party that can again be trusted," he said.

According to BBC predictions the Conservatives won 44 percent of the national vote in the local elections versus 25 percent for the Liberal Democrats and just 24 percent for Labour -- its worst share since comparable records began in 1973.

"People are sending a clear and strong message. There's a lot of dissatisfaction. If we deal with it we can turn things around, if we don't we'll go down," Labour lawmaker Geraldine Smith told Reuters.

With all the results counted from local councils in England and Wales, Labour had lost 331 councillors and the Conservatives had gained 252. Analysts said anything more than 200 losses for Labour would be a very bad result.

"It's clear to me that this has been a disappointing night, indeed a bad night for Labour," Brown told reporters. "My job is to listen and to lead and that is what I will do."

BROWN EYES RELAUNCH

Despite the upset, most Labour lawmakers said the party would be foolish to start casting around for a new leader and Brown was preparing a fight back with plans to unveil a new legislative programme, possibly as early as next week.

The Treasury will also be under pressure to come up with new measures to restore Labour's credibility on the economy -- hard won over the past 10 years when Brown was finance minister but squandered in recent months after a mistake over tax rates.

But the gloomy economic news continued to roll in. British house prices suffered their biggest annual fall in 15 years in April, according to Britain's largest mortgage lender, HBOS Plc.

"If the economic crisis continues through 2010, Brown's dead in the water," MORI pollster Robert Worcester told Reuters.

The Conservatives, the once dominant party of Margaret Thatcher and Winston Churchill, were in buoyant mood after more than a decade in the political wilderness.

They scored victories in the north of England where they have struggled and in Labour heartlands in Wales. Labour lost Reading council, its last remaining stronghold in the wealthy southeast of England.

"I think this is a very big moment for the Conservative Party, but I don't want anyone to think that we would deserve to win an election just on the back of a failing government," said Conservative leader David Cameron. (Additional reporting by David Clarke, Sumeet Desai, Jodie Ginsberg, Michael Holden, Paul Majendie and Astrid Zweynert; Editing by David Clarke and Ibon Villelabeitia)

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