Senior Tories are predicting they will lose the Blackpool South by-election as counting gets under way.
Sources told Sky News' political correspondent Tamara Cohen they did "not expect to hold" the seat - which they won with a 3,690 majority in 2019.
And they said the "stars could not be more aligned against us" following scandals hitting local MPs.
Follow live: Tories braced for potentially difficult night in local elections
The by-election was called after the former Conservative MP Scott Benton was caught in a sting by the Times newspaper, suggesting he was willing to break lobbying rules for money.
As a result, he was suspended from the Commons for 35 days, meaning he was subject to a recall petition in his constituency.
But instead of facing removal from his seat, Mr Benton resigned from parliament, triggering a vote for a new MP.
In an added painful twist for the Tories, the candidate standing to replace him, David Jones, was revealed as the chairman of the Fylde Conservatives - the area represented by the latest scandal hit MP Mark Menzies.
Mr Menzies hit the headlines after claims he misused campaign funds - including by calling a member of the local association to say he was locked in a flat by "bad people" and needed £5,000 as a matter of "life and death".
Mr Jones denied he knew anything about the incident - which was allegedly reported to the Conservative Party three months ago - until it was revealed in the media.
Labour sources told Sky News they were confident of a win in Blackpool South, despite it being a seat held by the Tories for 57 of the 78 years it has existed.
However, Labour did hold the constituency between 1997 and 2019 - before Boris Johnson and the Conservatives won over a number of the so-called Red Wall seats in the north of England.
At the by-election, Labour claimed their activists on the doorsteps reported large numbers of former Tory voters saying they would be voting Labour for the first time.
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Tap hereThe by-election comes at the same time as a range of local council, mayoral, and police and crime commissioner votes across both England and Wales.
Tory sources told Tamara Cohen they were expecting to lose upwards of 500 seats, which would be a big blow to the party ahead of a general election.
But Labour sources claimed the number would be far fewer - despite the party bounding ahead of the Conservatives in national polling.
Speaking to Sky News late on Thursday night, Labour Party chair Anneliese Dodds would not put a number on how many council seats would be a good result for her, saying: "I think the key thing is going to be to see whether Labour is moving forward in those areas where it's really critical that we build support before the next general election."
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