Stephen Timms, the Labour candidate, won by 11,818 but apathy in the constituency in east London cut the turnout to 35.37 per cent. The Conservative vote fell massively, but the drama surrounding Mr Kellaway's defection kept them in second place.
The switch of Mr Kellaway to the Labour Party on the day before the election introduced high drama into what until then had been a dull contest in a safe Labour seat. Mr Timms won with 14,668, Philip Hammond, the Conservative candidate, polled 2,850, and Mr Kellaway received 821, losing the deposit.
It was revealed last night that Mr Kellaway had originally intended to announce his defection at the declaration of the result on a stage in East Ham town hall last night. But Labour Party managers persuaded him to bring forward the announcement to kill off his campaign. Mr Kellaway, 40, an economist and market research consultant approached Labour on Monday.
It appears that he had had increasing doubts about his campaign and had disagreed with Liberal Democrat officials who wanted him to attack the Labour controlled Newham Borough Council more strongly. He was the only non-Labour councillor.
Mr Kellaway was not at the count last night, but Liberal Democrat representatives did turn up to check the European Parliament election votes being verified in the same hall. Kathleen King, chairman of Newham Liberal Democrats, said: 'Our vote has collapsed and I can't say that I'm very sorry.' She had not voted in the by-election after spending weeks campaigning for Mr Kellaway.
Liberal Democrat helpers had spent the day campaigning for their party's candidates for the European Parliament in two local constituencies and had removed all pictures of Mr Kellaway and posters from their HQ.
The defe ction of Mr Kellaway at such a crucial moment was a bitter blow to Mrs King and party workers who had expected to come a respectable second.
Mr Timms, 38, a company manager and former leader of Newham council said last night: 'I had been aware that he had been attracted by some aspects of the Labour Party for some time.
'He was certainly under the impression that he was under pressure from the Liberal Democrats to blacken the achievements of Newham Borough Council. He was also extremely unhappy about the record of the Liberal Democrats in Tower Hamlets and the way they handled the race issue.
'He talked to a number of people on Monday and I was one of them. He said to me that he had made up his mind over the weekend that this was what he wanted to do.'
The defection, believed to be the first in the middle of a campaign, continues Newham North East's history of local political dramas. In the 1970s it was the scene of a battle between left and right in the Labour Party.
The then Labour MP Reg Prentice was deselected and later defected to the Tories. Labour won the seat back in 1979 and yesterday's by-election was caused by the death of Mr Prentice's successor, the MP Ron Leighton.