Liberal Democrat leader Nick Clegg said he was "really sad" at his party's election results after a bruising night for the coalition.
Labour has racked up big gains at the expense of the Tories and Clegg's party in English council contests.
But Clegg insisted his party would "continue to play our role" in Government dealing with the economic crisis.
Speaking outside his London home he said: "I am really sad that so many colleagues and friends, Liberal Democrat councillors, who have worked so hard, so tirelessly for so many years for communities and families in their local areas have lost their seats and I want to pay tribute to all the great work they have done.
"I am determined that we will continue to play our role in rescuing, repairing and reforming the British economy.
"It's not an easy job and it can't be done overnight but our duty is to boost jobs and investment and to restore a sense of hope and optimism to our country."
With the potential for further blows for the Liberal Democrats in Scottish local elections and the London mayoral contests, Clegg said the coalition was in a "difficult mid-term period".
He said: "If you look at the results overnight, the ones that have come in, Labour has clearly had a good night.
"The task for Labour and the question for Labour, frankly, is to move beyond winning votes against two coalition parties who are in government, taking difficult decisions at a difficult mid-term period of this Government, to actually providing answers and solutions to the challenges and dilemmas that we face as a country.
"I believe that over time people will come to acknowledge our unique role, the Liberal Democrats, in this Government as the only party in British politics that combines responsibility on the economy with social fairness."