Reform UK leader Richard Tice has said his party is becoming "the real opposition" to Labour after coming a strong third in the Blackpool South by-election.
The party, a successor to Nigel Farage's Brexit Party, came just 117 votes behind the Conservatives.
Mr Tice told the BBC it was "clear that the Tories are on the way down".
Conservative chairman Richard Holden said it had been a "disappointing night" for this party.
"But that's what you'd expect from parties in midterm of government," he added.
Reform UK also pushed the Conservatives into third place in 16 councillor seats in Sunderland.
The election expert Professor Sir John Curtice said the party's showing in Sunderland was "quite substantial".
However, he added that their vote share was down on what UKIP, a precursor to Reform, achieved in 2015-6.
Reform UK stood in a relatively low number of areas in these local elections, fielding 326 candidates out of a possible 2,660. It has won one seat in Havant, Hampshire.
Celebrating his party's performance in the parliamentary Blackpool South by-election, Mr Tice said he was delighted with securing 17% of the vote.
Labour's Chris Webb won the seat with 10,825 votes, a share of nearly 60%. The Conservatives secured 3,218, while Reform candidate won 3,101.
"What's rapidly becoming clear... as more people hear about Reform is that we're becoming the real opposition to the Labour Party in the North, in the Midlands, in Wales," Mr Tice said.
"We're on the way up and it's quite clear that the Tories are on the way down."
Asked about the possibility of Reform UK winning a parliamentary seat at the next election, Mr Tice said the UK had the "wrong electoral system".
"It is patently unfair if you're getting 17% of votes across the country but because of our system you can't get any seats - that shows democracy isn't working," he said.
"That is why most Western nations have some form of proportional representation.
"The irony is the Tories are collapsing so fast, very soon they'll be begging to have proportional representation to stop a complete annihilation of the Tory party."
Mr Tice was also asked if Nigel Farage, who previously led the party, would be returning to frontline politics for the general election expected this year.
"The more help Nigel feels able to give the better. He's got a big decision to make… and of course the clock is ticking," he said.
Reform UK currently has one MP in Parliament, after the one-time Conservative deputy chairman Lee Anderson defected earlier this year.
Speaking to BBC Radio 4's Today programme, Mr Anderson rejected the idea his new party was helping Labour, saying that in many places the combined Reform and Conservative total would not beat Labour.
"Come the general election this party is going to win seats, a vote for Reform is a vote for Reform," he said.