While defeated independent incumbent Zac Goldsmith had quit the Tory party, the result is a hammer blow to Theresa May and casts huge doubt over whether she can hold Tory seats where the electorate opposes Brexit.
Her party tried to play down the result saying that it "doesn’t change anything", but Lib Dem leader Tim Farron declared his party are now "carrying the torch for all of those who want a real opposition to this Conservative Brexit government".
Labour’s already small vote in the seat was completely decimated, with the party’s candidate Christian Wolmar losing his deposit.
Mr Goldsmith triggered the by-election after resigning from the Conservative Party following the announcement by Ms May’s administration to build a third runway at Heathrow airport.
But while Ms Olney aligned herself with Mr Goldsmith on opposing Heathrow, she fought a fierce campaign on the Government’s plans for leaving the EU, promising to vote against triggering Article 50 in the Commons if elected. Over 70 per cent of constituents in Richmond voted to Remain.
The candidate, who joined the Lib Dems after their devastating 2015 election defeat, said after her victory: "It does look now as if we can have a vote in Parliament that might override the referendum.
“And I will, obviously, be voting to Remain because that is always what I have believed."
Asked if she would actively resist Brexit as an MP, she said: "Absolutely. Now I've been given this mandate."
The result saw Ms Olney poll 20,510 votes to Mr Goldsmith's 18,638, on a turnout of 41,367, or 53.6 per cent. The 21.75 per cent swing to the Lib Dems from Mr Goldsmith topped the 19.3 per cent swing they achieved from the Tories in the Witney by-election.
When all the votes were counted, tellers revealed she had snatched 49.7 per cent in a result she claimed had sent a "shockwave" through Downing Street.
Mr Farron said: "We are the only party fighting to keep Britain open, tolerant and united, and the only party that has said, loudly and proudly, that we want Britain to remain a member of the single market and that we want the people to be given the final say over the Brexit deal.
"That message has been resoundingly backed by the people of Richmond Park."
He pointed out that if the Lib Dems scored the same swing at a general election it would see his party steal dozens of seats from the Tories.
As he came to terms with his shocking defeat, an emotional Mr Goldsmith said his decision to call a by-election over Heathrow was "not a political calculation. It was a promise that I made that I kept."
But with Brexit clearly the key driver of the outcome, many were waiting to see if Ms May would respond to the result this morning, having taken the decision not to stand a Conservative candidate in the race.
A Tory spokesperson said today: "This result doesn’t change anything. The Government remains committed to leaving the European Union and triggering Article 50 by the end of March next year."
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